Commissioner Of CGST And Central Excise Bolpur Commissionerate vs. M/S Sarva Mangalam Gajanan Steel PVT LTD

Facts

The Revenue, Commissioner of CGST & Central Excise, Bolpur Commissionerate, filed appeals before the High Court challenging an order by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The CESTAT had allowed the respondent assessee's appeal. The dispute concerns the eligibility of the assessee to avail Cenvat credit on certain inputs. This is the second round of litigation before the High Court concerning the same assessee and the same issue. In the previous round, the High Court had remanded the matter to the CESTAT for fresh consideration, specifically regarding the classification issue. Upon remand, the CESTAT decided the classification issue against the assessee but then observed that classification is irrelevant for Cenvat credit eligibility. The CESTAT, in its impugned order, noted that the assessee purchased goods from SAIL and others, which were heated, straightened, cut, and rerolled to manufacture final products, and that the assessee's rolling mill had the capacity to do so. The Revenue's argument relied on observations made by the adjudicating authority regarding the requirement of ingots and billets for manufacturing certain products, which the High Court found not relatable to the assessee's case.

Held

The Court held that no substantial questions of law arise for consideration. Regarding the first and third issues, the Court found that the CESTAT had appreciated the factual position, noting that the assessee purchased goods which were then subjected to heating, straightening, cutting, and rerolling to manufacture their final products, and that the assessee's rolling mill had the capacity to perform these operations. The Court found that the Department had not shown this factual position to be wrong. Concerning the second issue, the Court acknowledged that while the classification of an input might generally be irrelevant for Cenvat credit, the Tribunal's observation was made in a context where classification was a significant issue argued by both parties. However, the Court ultimately found that the Tribunal had granted relief to the assessee based on its appreciation of the facts. Regarding the fourth issue, the Court implicitly agreed with the Tribunal's finding that the Department had not produced sufficient evidence to counter the assessee's claim about the use of the goods in manufacturing, especially in light of the assessee's rolling mill capacity. Therefore, the Court found no substantial questions of law arising from the CESTAT's order.

Key Issues

The Court had to decide the following substantial questions of law: 1. Whether, in terms of Rule 3(1) of the Cenvat Credit Rules, 2004, the respondent/assessee is eligible to avail Cenvat credit on inputs when the respondent does not possess any furnace to use such inputs in or in relation to the manufacture of the final product? 2. Whether, in the facts and circumstances of the case, the Learned Tribunal is right and justified in observing that for the purpose of eligibility of Cenvat Credit, the classification of the input is irrelevant? 3. Whether the respondent can avail Cenvat Credit on the goods which failed to satisfy the definition of 'input' in terms of Rule 2(k) of the Cenvat Credit Rules, 2004 and the same were not used in or in relation to the manufacture of excisable final products? 4. Whether, in terms of Rule 9(5) of the Cenvat Credit Rules, 2004, the burden of proof is upon the respondent to establish that the goods covered under Central Excise Tariff sub-heading No.72044100 procured by the respondent, treating them as 'inputs', have been used in the manufacture of finished products without requiring a furnace in the factory? Contentions: Petitioner (Revenue): Argued that the assessee is not eligible for Cenvat credit on inputs if they do not possess a furnace for their use in manufacturing, citing the definition of 'input' and the burden of proof under Rule 9(5). Relied on observations made by the adjudicating authority in paragraph 6.2 of the order-in-original dated 13th February, 2017. Respondent (Assessee): Contended that the CESTAT correctly appreciated the factual position, noting that the purchased goods were processed (heated, straightened, cut, rerolled) to make them suitable for their rolling mill, and that the Department failed to counter this claim with evidence. The assessee implicitly argued that the classification of the input is irrelevant for Cenvat credit eligibility, as observed by the Tribunal.