CENVAT Credit Can’t Be Denied For Use Of Prime Quality Materials In Manufacture: CESTAT

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that there is no restriction in the CENVAT Credit Rules that the Appellants should not use prime quality materials for the manufacture of final products.

The single bench of P.K. Choudhary (Judicial Member) has observed that as long as there is no dispute regarding the receipt and consumption of the inputs of a duty-paid character, the benefit of the CENVAT credit cannot be denied.

The appellant/assessee is engaged in the manufacture of non-alloy ingots and industrial oxygen gas. A Show Cause Notice was issued to the appellant alleging irregular availment of CENVAT credit against 1372.35 MT of TMT Bars (cutting) and Tore Steel/MS Tore (cutting).

The Department noted that the items of steel cannot be treated as any input used for the manufacture of their finished goods, i.e., MS ingot. The Show Cause Notice also mentioned that no prudent manufacturer can use a product of higher value to manufacturing a lower-valued product, in much the same way TMT bars cannot be treated as any input for the manufacture of MS ingot.

The adjudicating authority confirmed the demand for CENVAT credit and also imposed a penalty of an equal amount under Rule 15(1) of the CENVAT Credit Rules, 2004.

The assessee submitted that the iron and steel in the form of TMT bars and cuttings were of inferior quality, but at the same time, they could be used as melting scrap in the manufacture of MS ingots, thereby allowing credit to be given for such iron and steel products.

The tribunal, while setting aside the order, noted that there was no dispute as to the payment made by the appellant to the supplier, and therefore the benefit of CENVAT credit cannot be denied.

Case Title: M/s. Shakambari Overseas Traders Private Limited Versus Commissioner of CGST & CX

Citation: Excise Appeal No.76349 of 2018

Date: 20.01.2023

Counsel For Appellant: Advocate N.K.Chowdhury

Counsel For Respondent: Authorised Representative A. Roy

Click Here To Read The Order