The Customs Excise and Service Tax Appellate Tribunal (CESTAT) held that Input tax credits cannot be denied to the recipient even if the duty was legally not payable by the supplier
The appellant is engaged in the manufacture of M. S. Ingots and M. S. Billets on which central excise duty is being paid. The appellant procured parts of the induction furnace on payment of central excise duty on which credits were availed. This has been disputed by the department.
The department contended that the goods on which credits have been availed were supplied by one, M/s. Inductotherm (I) Pvt Ltd, Ahmedabad, which was cleared ‘as such’ at a value higher than the value at which the said goods were procured by the supplier. It was also contended that the said goods were not manufactured by the supplier but were cleared ‘as such’. Show Cause Notice was issued.
The Tribunal is comprising of Judicial Member, P.K Choudhary pronounced the Order on an application filed by M/s Jai Balaji Industries Ltd.
The Tribunal observed that, in view of the specific provisions contained in Rule 3(5) and 3(6) aforesaid, the appellant company receiving input from the supplier who has removed the said goods ‘as such’ (being bought out goods) is legally entitled to credit even if the said goods have not been manufactured by the supplier.
The Tribunal further stated that the appellant is legally entitled to avail credit on inputs which though not manufactured by the supplier, has been removed by the supplier on the strength of duty paid excise invoice particularly that goods have been physically received by the appellant for use in manufacture.
While relying on the judgment by Punjab and Haryana High Court in the case of CCE, Chandigarh vs. Ranbaxy Labs held that even if duty was legally not payable, credit cannot be denied to the recipient of goods when admittedly duty has been collected by the Revenue.
Allowing the appeal Tribunal also noted that in the entire proceedings against the appellant for denial of credit, there is no allegation or finding that the appellant has intentionally availed irregular credit with ulterior motive or that the credit has been availed wrongly in collusion with the supplier.
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