CESTAT Allows Cenvat Credit To Indian Oil On Excise Duty Paid Towards Manufacturing Activity

The bench of P.K. Choudhary (Judicial Member) has observed that once duty is paid by the assessee, treating the activity as manufacturing activity by the Department, Cenvat credit is available and there is no question of denial of Cenvat credit.

The Appellant/Indian Oil is engaged in the manufacture and sale of petroleum products. The petroleum products are manufactured in the refineries of the appellant situated in various parts of the country. In the course of refining crude oil, one of the petroleum products, bitumen, is produced.

During the period from April 2013 to June 2017, the appellant used Crumb Rubber Modifier (CRM) for mixing with bitumen to produce crumb rubber modified bitumen (CRMB), which was cleared upon payment of duty from the Haldia refinery. The appellant also availed of Cenvat Credit on handling services used during the production of CRMB. Regular Excise Returns were filed reflecting the amount of Cenvat Credit claimed and utilised and the clearance of CRMB upon payment of duty. Permission for mixing CRM with bitumen to produce CRMB was granted by the jurisdictional Central Excise authorities.

The dispute was regarding the availment of Cenvat Credit on the CRM and Handling service used within the Refinery. The adjudication order disallowed the Cenvat Credit and determined it as payable by the assessee along with interest and a penalty was also imposed.

The appellant submitted that the duty paid on the crumb rubber modifier bitumen cleared from the Haldia Refinery premises was all along much more than the cenvat credit availed. The additional amount of duty was paid from a Personal Ledger Account (PLA) and no refund has been claimed on the excess amount paid.

According to the department, the appellant wrongfully obtained MODVAT/CENVAT Credit on CRM and Handling Services used in the manufacture of CRMB and then used it to pay Central Excise duty on CRMB.The process did not amount to the manufacture of excisable goods.

The appellant stated that as handling services were used before the place of removal, there was no occasion for disallowance of Cenvat Credit on input services.

The issue raised was whether the assessee has availed Cenvat Credit correctly when the activity undertaken by them on the inputs, according to Revenue, does not amount to manufacture.

The tribunal noted that when the Cenvat credit is availed on the inputs and utilised for payment of duty on the final product, there would be no requirement for reversal of the said credit even if the activity undertaken by the assessee does not amount to manufacture.

The CESTAT set aside the order imposing a penalty on Indian Oil.

Case Title: M/s. Indian Oil Corporation Limited, Refinery Division Versus Commissioner of CGST & CX

Citation: Excise Appeal No.75721 of 2021

Date: 23.08.2022

Counsel For Petitioner: Romi Agarwal

Counsel For Respondent: K.Chowdhury

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