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CENVAT credit — Input used in manufacture of exempted intermediate product, which in turn used in final product cleared on duty payment — Credit of duty cannot be denied on such inputs — CBEC Manual binding on Department — Credit allowed.
Facts:
Respondents were in the business of manufacture of blank/unrecorded cassettes and were availing CENVAT credit facility. One of the inputs used by them was art-paper and gum-base paper which was converted into inlay cards and stickers used in the manufacture of cassettes. Inlay cards as well as stickers are fully exempt from duty. The dispute arose regarding eligibility of CENVAT credit on art-paper and gum-base paper.
According to the Revenue, since art-paper and gum-base paper are directly used in the manufacture of inlay cards and stickers, which are exempt from payment of duty, are not eligible for CENVAT credit even if the inlay cards and stickers manufactured from these inputs are used in the factory for manufacture of cassettes, whereas according to the assessee inlay cards as well as stickers are not finished products but intermediate products used in the manufacture of final product and therefore, CENVAT credit on art-paper and gum-base paper would be eligible for taking credit. Cenvat credit of duty on inputs used in the manufacture of intermediate product would be available even if the intermediate product is exempt from duty as long as the intermediate product is used in the manufacture of finished goods on which duty is paid. Further, a reference to the CBEC’s Excise Manual of supplementary instructions was made by the Tribunal, wherein the issue regarding availment of CENVAT Credit on intermediate products is discussed.
Held:
Applying the ratio of the Supreme Court judgement in the case of Escorts Ltd. v. CCE, Delhi-2004 (171) E.L.T. 145 (SC), it was held that CENVAT credit shall be admissible in respect of the amount of inputs contained in any of the bye-product and similarly credit shall not be denied if the inputs are used in any intermediate product. Although the intermediate goods are exempt from payment of duty and that the inputs are used in or in relation to the manufacture of final products, whether directly or indirectly. It was held that in case there is no reference of a particular issue in the Act/Rules, inference can be drawn from the CBEC’s Excise Manual and the said instructions will be binding on all Central Excise officers and applicable to all situations. The Revenue’s appeal was dismissed.
