2023 (1) TMI 342 - AT - Central Excise
CENVAT Credit - removal of cenvatable components/ spares as such under CT-3 certificate without reversal of Cenvat Credit - contravention of the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004 read with Notification No. 22/03-CE dated 31.03.2003 - recovery alongwith interest and penalty - whether the assessee was required to reverse the cenvat credit availed on components/ spares (inputs) cleared as such to EOUs units against the CT-3 certificate? - HELD THAT:- On the identical issue the tribunal in the matter of M/S AROMA CHEMICALS VERSUS COMMISSIONER (APPEALS-I) , CENTRAL EXCISE, MEERUT [2018 (2) TMI 383 - CESTAT, ALLAHABAD] has held that if the Cenvat credit is availed on inputs and if the same are cleared to 100% EOU as provided under sub-rule (6) of Rule 6 of Cenvat Credit Rules, 2004, Cenvat credit of duty paid on such inputs cannot be denied.
In the present matter it is undisputed fact that on imported spares/ components appellant has undertaken the testing process. The Department and Ld. Commissioner both are of the view that the process carried out by the appellant within the factory do not bring about any new product. After undertaking of testing there is no new products with distinctive name, use and character is emerged and the components/spares of the EPBAX systems remains same even after mere electrical and functional testing which can not be considered as manufacture as defined under Section 2(f) of the Central Excise Act, 1994. Therefore, the contention is that the spares/ components cleared to EOUs are nothing but removal of “Input as such” and in terms of Rule 3 (5) of the Cenvat Credit Rules, 2004 assessee have to reverse the cenvat credit - there is no justification for demand of an amount in terms of Rule 3(5) of the Cenvat Credit Rules. Clearly, the process carried out is in the nature of finishing process which can be considered as ancillary to the manufacture of a finished product. In the facts and circumstances of the case, we find no justification for demand of such amount under Rule 3(5) on the clearances made to 100% EOU.
Cenvat demand of Rs. 1,25,65,890/- on input services rendered by the Foreign Service providers - HELD THAT:- Under the un-amended provisions of sub-rule (4) of Rule 3 of the Cenvat Credit Rules, 2004 (effective up to 30-6-2012), there were no specific restrictions imposed for utilization of credit for discharging the liability of service tax under reverse charge mechanism by the recipient of service. Such restriction was brought with effect from1-7-2012, by amending the provisions of the said rule. In the present case, since the period of dispute is prior to 01.07.2012, the case of the appellant will be governed under the provisions of unamended Rule 3(4) ibid and in absence of specific restrictions contained therein for non-utilisation of Cenvat credit by the service recipient, the benefit of the existence rule is available to the assessee for utilization of Cenvat credit for payment of service tax under reverse charge mechanism - the argument of revenue for confirming the demand cannot sustain in law.
Denial of Cenvat Credit pertaining to other premises/ branch offices of the Appellant - HELD THAT:- The credit could not have been denied on the ground that the appellant did not have centralized registration during the period.
Availment of credit by Appellant without a centralized registration - HELD THAT:- The appellant had applied for centralized registration. The non obtaining the centralized registration at the best is a technical issue, since there is a substantive adherence of law in view of the fact that service tax has been apparently paid on the basis of centralized registration therefore credit could have been taken in the centrally registered office. Therefore it cannot be said that credit has been availed wrongly. It is not a case of the department that on the input services/ invoices, no service tax was paid and there is no dispute about receipt and use of the services, which are the main criteria for allowing Cenvat credit on input service - only on the technical infraction should not be denied. Further, Assessee was also registered with Central Excise Department from 1998 as manufacturer. The manufacturer can also avail the Cenvat Credit.
The assessee is entitled for cenvat credit - Appeal allowed - decided in favor of assessee.