The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the clearance of transformer oil ‘as such’ is liable to reverse availed CENVAT credit of excise duty under rule 3(5) of CENVAT Credit Rules (CCR),2004.
Indo Tech Transformers Ltd, the respondent-assessee was engaged in the manufacture of transformers and their parts falling under Chapter Heading 8504 of the Central Excise Tariff Act 1985 they are registered with the Central Excise department and are availing CENVAT credit on various inputs including transformer oil.
The assessee appealed against the order passed by the adjudicating authority for dropping the proceedings and held that the transformer oil was not cleared ‘as such’ by the respondent as alleged in the show cause notice (SCN).
T.R. Ramesh, the counsel for the assessee contended that from the show cause notice, it was clear that the input ie, transformer oil was cleared separately by the assessee under different invoices ‘as such’ in barrel, and while availing credit on the oil.
Rudra Pratap Singh, the counsel for the department contended that there was no provision under Rule 3 (5) of CCR providing for an exception for reversal of credit when inputs are cleared ‘as such’ when the value of the said inputs was included in the value of the final product. In such circumstances, the adjudicating authority ought to have held that the respondent- the assessee had to reverse the credit taken on the input viz. transformer oil which had been cleared ‘as such’.
The Bench observed that the clearance of the transformer oil ‘as such’ is liable to reverse the credit as per provisions of Rule 3 (5) of CENVAT Credit Rules and in the present case the transformer oil was used for inspection and testing and was not removed ‘as such’ was not put forward.
The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) held that the assessee was not liable to reverse the availed CENVAT credit.
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