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ELIGIBLE INPUTS FOR TAKING CENVAT CREDIT AS DECLARED BY TRIBUNALS/HIGH COURTS

By: Mr. M. GOVINDARAJAN

September 8, 2016

ELIGIBLE INPUTS FOR TAKING CENVAT CREDIT AS DECLARED BY TRIBUNALS/HIGH COURTS

Pre-requisite
The definition of input is very wide as held in Commissioner of Customs (Exports), Chennai V. Prashray Overseas
Private Limited 2016 (5) TMI 1106 - MADRAS HIGH COURT and includes even packing material, fuel, electricity
etc., Stipulation that CENVAT credit ought not to have been claimed, has in built stipulation that inputs had suffered
some duty. If inputs had not suffered any duty then question of claiming CENVAT credit would not arise.
In Paramount Communications Limited V. Commissioner of Central Excise & Service Tax, Jaipur 2015 (11) TMI
1560 - CESTAT NEW DELHI the supplier has paid the duty on the raw materials purchased by the appellant. The
appellant has also paid duty to the supplier of the goods. The Tribunal held that Rule 3 mandates that when the
appellant has suffered duty, the appellant is entitled to take CENVAT credit. The appellant has correctly availed
CENVAT credit. The appellant has no concern whether the supplier has manufactured the inputs or not. The
Adjudicating Authority cannot proceed against the appellant to deny CENVAT credit in such a case.
Beneficial legislation
In Srinathji Ispat Limited V. Commissioner of Central Excise & Service Tax, Ghaziabad 2015 (10) TMI 2072 CESTAT NEW DELHI the Tribunal held that CENVAT scheme, being beneficial legislation, it should be given as wider
meaning as possible. The inputs means anything essentially used in the process of manufacture. The certificate of
Chartered Engineer produced along with photographs explaining use of impugned items in manufacture of moulds
which specifically mentioned in definition of capital goods in Rules. The impugned items are eligible for credit as
inputs.

MS items
In Commissioner of Central Excise, Visakhapatnam V. Hindustan Petroleum Corporation Limited 2016 (6) TMI 606

- CESTAT HYDERABAD the respondents are the manufacturers of petroleum products and availed credit of MS items
(HR plates/sheets) used for repair and maintenance of storage tanks. The department was of the view that the
impugned goods are not covered by the definition of input as they were used in the installation of huge tank
embedded to earth and become civil structures. The original authority disallowed the credit and ordered recovery of
the same along with interest and imposed penalty.
The Tribunal held that the storage tanks are used for storing petroleum products. It is compulsory for the appellant to
have these tanks kept under the earth as safety measure. This does not make a storage tank a civil structure. The
product that is stores in these tanks are extremely dangerous and there are statutory norms to be followed, while

transferring, carrying or storing petroleum products. The appellant has to abide by standards/guidelines issued by Oil
Industry and Safety Directorate. The product manufactured has to be stored in metallic tank which are kept under the
earth and these tanks have to be periodically required and maintained to prevent seepage. Hence maintenance and
repair of storage tanks can be said to be an integral part of manufacturing process carried out by the appellant.
Common inputs
In Bhairav Synthetics Private Limited V. Commissioner of Central Excise, Thane I 2015 (12) TMI 1051 - CESTAT
MUMBAI the common inputs were used in manufacture of dutiable and exempted products. No separate input
account was maintained. The appellant availed 20% of input credit and foregone up to the extent of 80% on the basis
of pro rata use of inputs to dutiable and exempted goods. The Tribunal held that since the appellants maintained
records of receipt of inputs, its consumption and availment of credit thereon which in view of CBE&C circular No.

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account was maintained. The appellant availed 20% of input credit and foregone up to the extent of 80% on the basis
of pro rata use of inputs to dutiable and exempted goods. The Tribunal held that since the appellants maintained
records of receipt of inputs, its consumption and availment of credit thereon which in view of CBE&C circular No.

703/19/2002-CX, dated 25.03.2003 is sufficient compliance of Rule 6(2), the Tribunal held that the credit cannot be
denied.
Bought out parts
In Thermax Limited V. Commissioner of Central Excise, Pune I 2016 (7) TMI 797 - CESTAT MUMBAI the
CENVAT credit on bought out items claimed to have been used in the erection of boilers at the site of the purchasers.
Since it is physically impossible to assemble and transport boilers in complete form, the pressure parts of boilers

manufactured and cleared from factory and other parts procured from outside delivered at erection site for complete

installation of boilers. In case of domestic clearance bought out parts directly delivered at site and credit can be
taken on the value thereof. However, in case of exports and supply to SEZ, bought out parts delivered to the factory
and after testing and connected with parts manufactured at factory, removed to installation site in SEZ or abroad.
Thus manufacture and clearance of boiler, for all practical purposes, effected from factory gate. The final product is

the boiler and as duty liable on value of boiler on complete form including value of bought out items every component
within it would be an input as per Rules. Bought out items are inputs and cannot be distinguished from inputs used in
manufacture of components within factory, as both have gone into manufacture of final product. The assessee is
entitled to take CENVAT credit on bought out parts used in installation of boilers.
Inputs for capital goods
In Ganga Kishan Sahkari Chinni Mills Limited V. Commissioner of Central Excise, Meerut I 2015 (10) TMI 2526 CESTAT ALLAHABAD the appellant was denied CENVAT credit on certain goods such as welding electrodes,
channels, hot strip mill plate, angles, MS plates, TMT bars, GCGSC sheet. For issue of show cause notice, the
appellant on some of the items like girder, hot strip mill plate, TMT, GCGSC sheet which were used in civil work, the
credit was reversed. The Revenue disallowed the credit for some items which were used for repairing old plant and
machinery and not used as capital goods or as inputs manufacturing of capital goods in the factory and thus they are
not eligible for the CENVAT credit. The Tribunal held that the inputs used in repair and maintenance of capital goods
which further used in manufacture of excisable finished goods. No final product can be manufactured without repair
and maintenance and upkeep of capital goods, inputs required for upkeep and maintenance, eligible for CENVAT
credit.
Absence of GRN
In Veer-O-Metals Private Limited V. Commissioner of Central Excise, Bangalore III 2016 (2) TMI 867 - CESTAT
BANGALORE the credit availed by the appellant in respect of 11 invoices stand denied on the sole ground that there
are no corresponding GRN (Goods Receipt Notes) and BIN cards. The appellants have explained that out of the
huge number of invoices being received by them, such non maintenance or non availability of GRN and BIN cards
cannot be held to be leading to the conclusive findings of non receipt of inputs. The Tribunal accepted the contents of
the appellants. The Tribunal held that the Revenue has not made any enquiries from the seller of inputs, as reflected
in the invoice. The appellants have recorded the invoices, inputs, along with the available CENVAT credit in their
statutory records. In the absence of inputs in question the corresponding final products could not be manufactured by
them. The non availability of the said documents which are not even the prescribed documents in terms of the Rules
and the purpose of which is only to show the receipt of the materials at the factory gate, cannot be held to be
conclusive evidence so as to arrive at a finding of the non receipt of the goods. In the absence of corroborative
evidence, the Tribunal found no merit in the stand of the Revenue. The Tribunal set aside the order and allowed the
appeal.
Invisible loss
In Sarda Energy and Minerals Limited V. Commissioner of Central Excise, Raipur 2016 (2) TMI 639 - CESTAT
NEW DELHI the point for decision is whether or not the appellants are right in taking credit on the full quantity of coal

brought by them on payment of duty from coal mines. The Department denied the credit attributable to the invisible
losses that occur due to washing of the coal to make it for use. There is no allegation in any proceedings that certain
quantity of input has been diverted or contained in some other product that arose during the processing of coal. The
admitted fact is that the 3% loss is solely attributable to washing. Considering the above factual position, the Tribunal
found no ground to reverse the CENVAT credit when the appellants bought and paid for the quantities of coal cleared
from the coal mine. The Tribunal allowed the appeal holding that the impugned order is unsustainable.
Inputs not in manufacturing process
In Commissioner of Central Excise & Customs, Aurangabad V. Fine Packaging Private Limited 2016 (3) TMI 801 CESTAT MUMBAI the respondent have availed the credit on inputs which was used in the process of printing and
lamination process of the polyester/BOPP Film and this activity was held to be non manufacture. The Tribunal held

that the plain reading of Rule 16 provides that CENVAT credit is allowed on the duty paid material treating it as inputs
for the purpose of various processes and after processing if the activity is not amount to manufacture, the assessee is
required to clear such processed goods on payment of duty which is equal to CENVAT credit and if the activity

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that the plain reading of Rule 16 provides that CENVAT credit is allowed on the duty paid material treating it as inputs
for the purpose of various processes and after processing if the activity is not amount to manufacture, the assessee is
required to clear such processed goods on payment of duty which is equal to CENVAT credit and if the activity
amounts to manufacture then excise duty is required to be paid on transaction value. As per this provision, even if

activity does not amount to manufacture the credit is permissible. The Tribunal held that CENVAT credit on the inputs
used in the process does not to manufacture is admissible.
Defective inputs
In Ericcson India Private Limited V. Commissioner of Central Excise &Service Tax, Jaipur 2015 (5) TMI 93 -

CESTAT NEW DELHI the Tribunal held that it is settled that once the inputs are issued for manufacture of the final

product and are further used and are found defective in the assembly line, the assessee cannot be asked to reverse
the credit.
Lubricants
In Northern Coalfields Limited V. Commissioner of Central Excise & Service Tax, Bhopal 2015 (6) TMI 1069 CESTAT NEW DELHI the Tribunal held that since the definition of inputs under Rule 2(k), includes all goods use in
factory by manufacturer and lubricants being not covered under the excluded category of goods under the said Rule,
credit of duty on lubricants is not to be denied.
Packing material
In Nilkamal Limited V. CESTAT, Chennai 2016 (5) TMI 305 - MADRAS HIGH COURT the High Court held that the
object of granting CENVAT credit is to ensure a single incidence of tax of final product. The very purpose of the value
added system is only to ensure this and to avoid incidence of tax more than once. In this case during the
investigation it was found that at the request of the dealers, the packing materials viz., HDPE Woven Sacks were also
sent along with finished product in loose conditions to enable them to load more materials per truck thereby reducing
the cost of freight per piece of the product. The Commissioner passed an order demanding recovery of excise duty
with penalty. The Commissioner (Appeals) allowed the appeal of the appellant. The Tribunal reversed the order of
Commissioner (Appeals) holding that if the packing material had not been used for the purpose of packing the
finished products the credit taken by the assessee for the duty on packing materials had to be reversed. The High
Court held that the surprise inspection did not reveal that the packing materials were recalled and again made use of
by the appellant as contended by the Revenue. The High Court allowed the appeal.
Barbed wire
In Commissioner of Central Excise, Nagpur V. KEC International Limited 2016 (3) TMI 992 - CESTAT MUMBAI the
Tribunal held that as per Rule 2(k) the input means and includes accessories of final product cleared along with the

final product. Barbed wire is an accessory essentially required for smooth operation of transmission tower and has to
be necessarily supplied along with main product as per terms and conditions of agreement with customers. The
CENVAT credit on barbed wire is rightly availed.
In Crystic Resins (I) Private Limited V. Commissioner of Central Excise, Delhi IV 2014 (5) TMI 1117 - CESTAT
NEW DELHI the appellant availed credit on fibre glass amounting to 2,78,828/- and subsequently cleared the goods
as such on payment of duty of 3,27,116/-. The Revenue has denied the credit on the sole ground that fibre glass
was not one of the inputs used in the manufacture of the appellants final product and as such they were not entitled
to avail the credit and confirmed the duty of 2,78,876/-. The Tribunal found no justifiable reasons for denial of credit
or for imposition of penalty inasmuch as fiber glass cleared on payment of excess duty by reversing more credit. As
such the entire credit availed by the appellant stand reversed by them, the entire situation is revenue neutral and
consequent confirmation of duty in respect of the credit so availed is not justified.

By: Mr. M. GOVINDARAJAN - September 8, 2016

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