2005 (2) TMI 628 - AT - Central Excise

Summary

Issues:
1. Whether the conversion of sheets by cutting/slitting of HR/CR coils amounts to manufacture.
2. Applicability of Board's Circulars and their binding nature on Revenue.
3. Availability of Modvat credit on HR/CR Coils used in cutting into HR sheets and C.R. sheets.

Issue 1: Conversion of sheets by cutting/slitting of HR/CR coils

The appellant sought a stay application claiming that the process of cutting/slitting HR/CR coils into sheets constitutes manufacturing. The consultant referred to Board's Circular No. 584/21/2001-CX, stating that such activity amounts to manufacture if the resulting product is classifiable under a different sub-heading of the Central Excise Tariff. Additionally, the Appellate Commissioner (Appeals) had previously ruled in a similar case that this process is incidental to manufacturing, allowing Modvat credit on the HR/CR Coils used. The Revenue did not appeal this decision, leading to its finality.

Issue 2: Applicability of Board's Circulars

The consultant argued that Circulars issued by the Central Board of Excise and Customs are binding on the Revenue, even if they interpret phrases differently from the Supreme Court. Citing a Supreme Court judgment, it was highlighted that such circulars take precedence and are binding on the Revenue under Section 37B of the Central Excise Act, 1944. The Tribunal acknowledged the binding nature of Board's Circulars and noted that the Circular in question clarified that slitting of HR/CR coils into sheets amounts to manufacture.

Issue 3: Availability of Modvat credit

The consultant contended that Modvat credit was available on the HR/CR Coils used in cutting into HR sheets and C.R. sheets. The Appellate Tribunal found the appellant's case strong for dispensation of duty and penalty, considering the Modvat credit taken on inputs and duty paid on cleared products, resulting in a revenue-neutral situation. Consequently, the Tribunal decided to dispense with duty and penalty until further orders, scheduling the case for a hearing on a specific date.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Kolkata addressed the issues surrounding the manufacturing process of cutting/slitting HR/CR coils into sheets, the binding nature of Board's Circulars on Revenue, and the availability of Modvat credit on the materials used. The decision highlighted the significance of Board's Circulars, previous rulings, and the appellant's compliance with duty payment, leading to the dispensation of duty and penalty in the case.