By TIOL News Service

BANGALORE, JUNE 19, 2013: THE assessee took CENVAT credit on inputs which were used in a process which was considered as manufacture. The product that emerged from that process was cleared on payment of duty. This duty payment was partly by debit in PLA and partly by debit in CENVAT account. According to the department, the above process did not amount to ‘manufacture' and hence the respondent ought not to have paid duty on the product. On this basis, CENVAT credit taken on the inputs was sought to be denied. Department also wanted to collect the amount under Section 11D.

In a rather rare and strange situation, the original authority and the appellate authority held in favour of the assessee. But obviously the wiser Committee of Commissioners decided that the matter needs to be appealed to in the Tribunal.

The Tribunal did not find any sustainable ground in this appeal against the concurrent findings of the lower authorities. On the other hand, the counsel for the respondent has placed on record a line of decisions which are to the effect that the CENVAT credit taken on inputs used in the manufacture of finished goods is not liable to be disallowed on the ground that the process in which the inputs were used did not amount to ‘manufacture'. In all the cited cases, the assessees were found to have paid duty on the finished goods.

The Tribunal noted that the respondent had paid duty on their finished products. Naturally, they collected this duty from their customers. The department is asking the party to remit such collections also to the Government under Section 11D of the Central Excise Act. Both the lower authorities eminently negatived this view of the department by holding that section 11D of the Act applied only to a person who had collected duty and not paid to the credit of the Central Government. Indisputably, the respondent paid duty on their finished goods and hence there is no question of a second payment of the same duty to the Central Government under Section 11D of the Act.

The Tribunal found it unfortunate that such concurrent view of the original authority and the appellate authority on the point was sought to be challenged by the department.

(See 2013-TIOL-926-CESTAT-BANG)