Relief to MRF Limited: CESTAT rules Manufacturer is entitled to take credit of amount equivalent to Cenvat Credit paid earlier [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the manufacturer is entitled to take credit of amount equivalent to Cenvat Credit paid earlier, thereby granting relief to M/s. MRF Limited.

The department was of the view that the Appellant by availing CENVAT credit on Obsolescent material which was earlier debited, had contravened the provisions of Rule 3(5B) ibid and therefore the ineligible credit was liable for reversal.

As the Appellant failed to reverse the ineligible CENVAT credit, a Show Cause Notice dated 27.06.2019 was issued to the Appellant seeking to recover the ineligible CENVAT credit in terms of rule 14(1)(ii) of CENVAT Credit Rules, 2004 read with Section 11A(4) of Central Excise Act, 1944 and to levy interest under Section11AA and to impose penalty under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section11 AC of Central Excise Act, 1944.

The Adjudicating Authority confirmed the demand of ineligible credit of Rs.34,84,905/- with levy of appropriate interest and imposed equal penalty of Rs.34,84,905/- on the appellant.

Advocate Preeti Mohan, appeared for the Appellant and submitted that the impugned order failed to address the primary issue as to whether retaking CENVAT credit by the appellant is permissible under the applicable law. It was pointed out that the impugned order failed to address the issue as to whether all the goods available at the factory of the appellant were obsolete or not and was misguided in confirming the impugned Order-in-Original without deliberating on this aspect.

It was submitted that the impugned order failed to discuss the submissions made by the Appellant for re-taking the CENVAT credit on 30.06.2017 and seeking to transition the said credit in terms of the provisions of the CGST Act. It was mentioned that the impugned order failed to appreciate the fact that, had the Appellant not retaken credit on the goods provisionally written off for accounting purpose, it might have permanently lost its legal right to claim credit on the goods which were still being used for manufacturing.

A Single Member Bench comprising Vasa Seshagiri Rao, Technical Member observed that “The provisions of Rule 3(5B) of erstwhile CENVAT Credit Rules, 2004 as mentioned above at paragraph 8 are very clear which states that when said inputs or capital goods are subsequently used in the manufacture of their products, the manufacturer is entitled to take the credit of the amount equivalent to the CENVAT Credit paid earlier.”

To Read the full text of the Order CLICK HERE

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