MRF Entitled To Re-Credit Of CENVAT Credit If Capital Goods Are Put To Use In Manufacture Of Final Products: CESTAT

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the assessee, MRF is entitled to a re-credit of cenvat credit if capital goods are put to use in the manufacture of final products.

The bench of Vasa Seshagiri Rao (Technical Member) has observed that the assessee has provided sufficient documentary evidence pertaining to the utilization of inputs in the manufacture of their final products. The demand for alleged ineligible CENVAT credit cannot be sustained.

The appellant/assessee is in the manufacture of tires for motor vehicles. Tyre flaps and compound rubber are holders of Central Excise. During the course of the audit, it was observed that the appellant had availed CENVAT credit on input or capital goods that were earlier written off or where provisions were made for write-offs in the books of accounts.

It appeared to the department that the CENVAT credit on obsolescent material, which was earlier debited, was taken back on June 30, 2017, without utilizing the same in the manufacture of final products, making it ineligible in terms of proviso to Rule 3(5B) of the CENVAT Credit Rules, 2004.

The department was of the view that the appellant, by availing of CENVAT credit on obsolescent material, which was earlier debited, had contravened the provisions of Rule 3(5B). Therefore, the ineligible credit was liable for reversal.

As the appellant failed to reverse the ineligible CENVAT credit, a show cause notice was issued to the appellant seeking to recover the ineligible CENVAT credit and to levy interest and impose penalties under Rule 15(2) of the CENVAT Credit Rules, 2004, read with Section 11 AC of the Central Excise Act, 1944.

The issue raised was whether the appellant is eligible to avail CENVAT re-credit on inputs, provisionally written off in the books of accounts, in terms of Rule 3(5B) of the CENVAT Credit Rules, 2004 or not.

The appellant contended that the order failed to address the primary issue as to whether retaking CENVAT credit by the appellant is permissible under the applicable law. The 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 order without deliberating on the aspect.

The tribunal has held that departments are free to verify the utilization of the inputs, whether used or not, in the manufacture of their finished products by the appellant.

Counsel For Appellant: Preeti Mohan

Counsel For Respondent: Harendra Singh Pal

Case Title: M/s. MRF Limited Versus Commissioner of GST and Central Excise

Case No.: Excise Appeal No. 40064 of 2023

Click Here To Read The Order