The restriction on claiming CENVAT credit under Notification No. 01/2011-CE applies only to the manufacturer availing the concessional rate of duty and does not extend to the buyer or end-user of those goods.

PER: P. A. AUGUSTIAN

The issue in the present appeal is whether the appellant is eligible to claim credit on the goods supplied by the manufacturer who had manufactured the goods by availing the benefit of Exemption Notification No. 01/2011-CE dated 01.03.2011. Appellant is engaged in manufacture of excisable goods including P & P Medicaments, Edible Preparations and Vegetable Oils etc. and availed cenvat credit on inputs, input services and capital goods. During verification of records, it is observed that the appellant had purchased fish oil from a local manufacturer and availed cenvat credit. Alleging that the appellant was not entitled to avail the credit and considering it as irregular availment of credit, show cause notice was issued on 30.03.2016 and Adjudication Authority as per Order-in-Original dated 30.05.2017, confirmed the demand with interest, appropriated the amount paid by the appellant and imposed penalty under 11AC (1)(c) of the Central Excise Act, 1944. Aggrieved by said order, an appeal was filed before the Commissioner (Appeals) and Commissioner (Appeals) as per the impugned order dated 10.04.2018 remanded the matter for Denovo Adjudication. Aggrieved by said order, present appeal is filed.

2. When the appeal came up for hearing, Learned Chartered Accountant (CA) for the appellant submits that the Appellant was a registered taxpayer under the Central Excise Act, engaged in the manufacture of excisable goods, including PRP medicaments (Tariff Item 30045090). edible preparations (Tariff Item 21069099), fixed vegetable oil (Tariff Item 15159099), and allied products. For the Appellant, ’Fish Oil’ is one of the principal raw materials used in the manufacture of various final products. The Appellant procured the said ’Fish Oil’ from M/s. Arjuna Extracts, who had cleared the goods at a concessional rate of 2% under Notification No. 01/2011-CE dated 01- 03-2011. Since the ’Fish Oil’ was used in the course of manufacturing activities, the Appellant availed CENVAT credit on such procurement. Learned CA further submits that owing to ambiguities in the CENVAT Credit Rules and the dispute prevailing on the issue of admissibility of CENVAT credit on goods cleared under Notification No. 01/2011-CE dated 01-03-2011, the Appellant reversed CENVAT credit amounting to INR 28,84,829, along with applicable interest and penalty under protest, and intimated the same to the Department vide letter dated 04-12-2014. However, the said reversal was effected only in the books of accounts and was inadvertently not reported in the ER-1 returns. Upon being pointed out by the Department, the Appellant duly reported the reversal under protest in the ER-1 return for the month of February 2016, filed on 09-03-2016. Learned CA draws our attention to the Notification No. 01/2011-CE dated 01.03.2011 and as per the said notification, exempted Excise Duty excess of the amount calculated at the rate of 1% ad valorem subject to condition that no credit of duty on inputs or tax on input services has been taken under the provisions of the CENVAT Credit Rules, 2004. Based on the above contention, and disregarding the submissions made by the Appellant, the Order-in-Original was passed confirming the ineligibility of CENVAT credit and appropriating the CENVAT credit reversed under protest, along with applicable interest and penalty. Aggrieved thereby, the Appellant filed an appeal before the Appellate Authority and First Appellate Authority categorically held that:-

“5. I have gone through the facts of the case, the submissions made by the appellant in their appeal memoranda and the submissions of the appellant made through the authorized representative of the appellant during the hearing. Prima facie, I find merit in the appeal. The credit availed on Fish Oil supplied by Manufacturers is only with regard to Fish Oil Manufacturers and not to the end users of Fish Oil like the appellant. The amendment carried out vide Notification No. 35/2015-CE i