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2019 (4) TMI 900 - HC - Central ExciseReversal of CENVAT Credit - clearance of goods (inputs) to their sister concern M/s. IMIL - Rule 3(4) of the Credit Rules, 2002 - Held that:- Respondent–M/s. IML had purchased Iron Ore Pellets from M/s. IIL. It is also an admitted position that M/s. IIL in turn had purchased inputs i.e. Iron Ore Pellets from M/s. Kundermukh which is a 100% EOU. Further, it is undisputed that M/s. IIL on receipt of Iron Ore Pellets, took CENVAT Credit of the duty paid by M/s. Kundermukh. However, it did not use the purchased inputs i.e. Iron Ore Pellets for further manufacture. In fact, the Iron Ore Pellets were removed by M/s. IIL as such i.e. as received from M/s. Kundermukh - when removing the Iron Ore Pellets as such i.e. without it being used in manufacture of any other product or it being processed per se, it had correctly in terms of Rule 3(4) of the Credit Rules, 2002 had correctly reversed the CENVAT Credit taken - decided in favor of the Respondent-Assessee and against the Appellant-Revenue. CENVAT Credit - Rule 3(6)(a) of CENVAT Credit Rules - Whether M/s. IMIL has correctly availed the CENVAT Credit as prescribed under Rule 3(6)(a) of CENVAT Credit Rules? - Held that:- The impugned order of the Tribunal proceeds incorrectly on the basis that there can be no limitation/ capping on the credit taken by the Respondent-M/s. IMIL where the goods have been supplied by M/s. IIL i.e. supplier in terms of Rule3(4) of the Credit Rules, 2002. Thus it is a complete misreading of the provisions. The capping of the CENVAT Credit is only in case of that manufacturer who uses the inputs in further manufacture and does not apply to a manufacturer who on acquisition of inputs does not use it for further manufacture but removes it as such so as to be governed by Rule 3(4) of the Credit Rules 2002.Thus in such case Rule 3(6)(a) of the Credit Rules, 2002 will prevail over Rule 3(5) of the Credit Rules, 2002 as it reduces the availing of credit in respect of goods manufactured by a 100% EOU. The next submission that the entire exercise of restricting the credit is an exercise for reassessing the duty paid by the supplier viz. M/s. IIL. Therefore, the submission that this exercise cannot be done in the absence of M/s. IIL in the present facts cannot be accepted. The question is answered in the negative i.e. in favor of the Appellant-Revenue and against the Respondent-Assessee. Appeal allowed - decided in favor of appellant.
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