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CX – When assessee has discharged duty on final product, credit cannot be disallowed on inputs alleging that process is not manufacture: CESTAT

2019-TIOL-1989-CESTAT-MAD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL 
SOUTH ZONAL BENCH, CHENNAI

E/42395/2018

Arising out of Order-in-Appeal No.389/2018(CTA-II), Dated:30.07.2018
Passed by the Commissioner of GST & CE (Appeals-II), Chennai

Date of Hearing: 14.03.2019
Date of Decision: 14.03.2019

M/s RUCHI SOYA INDUSTRIES LTD

Vs

COMMISSIONER OF GST AND CENTRAL EXCISE
CHENNAI OUTER

Appellant Rep by: Shri K Venkatesan, Adv.
Respondent Rep by: 
Shri L Nandakumar, AC (AR)

CORAM: Sulekha Beevi CS, Member (J)

CX – The assessee is engaged in manufacture of Refined Palmolien, Refined Palm Oil, Vansapathi and Acid Oil – During audit, it was noticed that assessee had availed Cenvat credit on high quality RBD Palm Stearin procured by them – The department was of the view that the process does not amount to manufacture – When the assessee has discharged excise duty on the final product, the credit cannot be disallowed on the inputs alleging that the process does not amount to manufacture – The department ought to have intimated the assessee before discharge of excise duty that the process does not amount to manufacture and that they need not pay excise duty – After discharging the excise duty, the department cannot disallow the credit – Further the payment of duty on the inputs is also not in dispute – The issue stands settled by the decision in case of M/s. Vishal Precision Steel Tubes & Strips Pvt. Ltd. – 2017-TIOL-613-HC-KAR-CX – Following the said decision, disallowance of credit is unjustified, same is set aside: CESTAT

Appeal allowed

Case law cited:

Commissioner of Central Excise, Bangalore-V Vs M/s. Vishal Precision Steel Tubes & Strips Pvt. Ltd – 2017-TIOL-613-HC-KAR-CX… Para 2

FINAL ORDER NO

Per: Sulekha Beevi CS:

Brief facts are that the appellants are engaged in manufacture of Refined Palmolien, Refined Palm Oil, Vansapathi, Acid Oil etc. During the course of audit, it was noticed that appellants had availed Cenvat credit on high quality RBD Palm Stearin procured by them. The department was of the view that the process does not amount to manufacture and hence appellants are not eligible for credit. Show-cause notice was issued for the period 1/2011, 12/2011 and 02/2012 to 07/2015 proposing to disallow the credit availed on RBD Palm Stearin. After due process of law, the original authority confirmed the demand along with interest and imposed penalties. In appeal, the Commissioner (Appeals) upheld the same.

2. On behalf of the appellant, the learned counsel Shri K. Venkatesan appeared and argued the matter. He submitted that theappellant has procured high density RBD Palm Stearin and used to manufacture final product, which is of low density RBD Palm Stearin. They have cleared final product on payment of excise duty. Later, the show-cause notice has been issued alleging that the process does not amount to manufacture. It is submitted by him that the credit cannot be denied when the appellant has paid excise duty on the inputs and used the same for manufacture of final products which were also cleared on payment of duty. The decision in the case of Commissioner of Central Excise, Bangalore-V Vs M/s. Vishal Precision Steel Tubes & Strips Pvt. Ltd., reported in 2017 (349) E.L.T.686 (Kar.) = 2017-TIOL-613-HC-KAR-CX was relied by the learned counsel to support the arguments.

3. The learned Authorised Representative for the Revenue Shri L. Nandakumar, AC (AR) supported the findings in the impugned order.

4. Heard both sides.

5. The issue is whether the disallowance of credit on inputs alleged to be used in the manufacture of final products is eligible or not. It is not in dispute that appellants cleared the final products on payment of excise duty. The show-cause notice has been issued alleging that the process does not amount to manufacture. When the appellant has discharged excise duty on the final product, the credit cannot be disallowed on the inputs alleging that the process does not amount to manufacture. The department ought to have intimated the appellant before discharge of excise duty that the process does not amount to manufacture and that they need not pay excise duty. After discharging the excise duty, the department cannot disallow the credit. Further the payment of duty on the inputs is also not in dispute. The issue stands settled by the decision in the case of M/s. Vishal Precision Steel Tubes & Strips Pvt. Ltd., (supra). Following the said decision, I am of the view that the disallowance of credit is unjustified and required to be set aside. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any.

(Dictated and pronounced in open court)

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