CESTAT allows CENVAT Credit to Adhunik Industries, Holds Denial based on Technical Objections Unsustainable [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bench at Kolkata, has granted relief in a dispute concerning denial of CENVAT credit to a steel manufacturing unit, holding that credit cannot be disallowed in the absence of clear evidence showing ineligibility or misuse.

The Tribunal confirmed that substantive benefits under the CENVAT Credit Rules cannot be denied merely on technical or procedural grounds.

The appeal was filed by Adhunik Industries Ltd., a steel manufacturer, challenging an order passed by the lower authority denying CENVAT credit and confirming consequential demand and penalties. The dispute arose from the Department’s allegation that the credit availed by the appellant was not admissible under the CENVAT Credit Rules, 2004.

The appellant contended that the disputed inputs and input services were used in or in relation to the manufacture of dutiable final products and that all statutory records, invoices, and returns had been duly maintained. It was argued that there was no allegation of fraud, suppression, or diversion of inputs, and that the denial of credit was based solely on technical objections without disputing actual use in the manufacturing process.

The Department defended the impugned order by asserting that the appellant failed to satisfy certain procedural requirements and therefore, the credit was rightly denied.

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After examining the records, a Division Bench comprising Ashok Jindal (Judicial Member) and P. Anjani Kumar (Technical Member), observed that the Department had not disputed the receipt of inputs or services, nor their utilization in the manufacturing activity of the appellant. The Tribunal held that once the nexus between inputs and manufacture is established and duty-paid nature of inputs is not in question, denial of CENVAT credit merely on technical grounds is not sustainable in law.

In the absence of evidence showing wrongful availment or intention to evade duty, the impugned order could not be sustained. Accordingly, CESTAT allowed the appeal filed by Adhunik Industries Ltd., setting aside the order denying CENVAT credit along with consequential demand and penalties.

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