2007 (5) TMI 478 - AT - Central Excise

Summary

Issues:
1. Duty credit on inputs used in manufacturing automobiles.
2. Reversal of credit on removed E.D. coated sheets.
3. Interpretation of Rule 3(3)(b) of the Cenvat Credit Rules.
4. Application of Section 11A of the Act in the demand raised.

Analysis:

1. The appellant, a manufacturer of automobiles, received inputs including sheet metal parts for manufacturing. The appellant claimed duty credit on all inputs used in automobile manufacturing, including the sheet metal parts. However, the issue arose when the appellant removed some E.D. coated sheets without using them in manufacturing, leading to a demand of approximately Rs. 73 lacs based on the value of the removed sheets as per the impugned order.

2. The appellant reversed the credit taken on the sheet metal parts upon removal, arguing that it complied with Rule 3(3)(b) of the Cenvat Credit Rules, which states that an amount equal to credit taken on inputs must be paid if inputs are removed as such or after being partially processed. The appellant contended that no credit was taken on the coating material, so only the credit taken on the removed sheets needed to be paid/reversed, which was done by the appellant.

3. The Revenue, represented by the learned SDR, argued that a previous Tribunal order favored the Revenue's position and that Rule 3(b) of Rule 3 of the Cenvat Credit Rules was irrelevant to the dispute. The Revenue claimed that the demand was correctly raised under Section 11A of the Act. However, the Tribunal agreed with the appellant, emphasizing that Section 11A demand can only arise if manufacturing a new product is involved, which was not the case here. The dispute centered on the operation of the Cenvat Credit Rules, specifically Rule 3(3)(b), which dictates the utilization and reversal of credit for removed or partially processed inputs.

4. The Tribunal highlighted that the appellant's compliance with the credit scheme by reversing the credit taken on the removed sheets alone, without any credit taken on the processing materials, satisfied the requirements of the Rule. The Tribunal differentiated the present case from the previous Tribunal order, stating that the amended provision altered the application, leading to the allowance of the appellant's application and the stay of recovery until the appeal's disposal.

This detailed analysis of the judgment addresses the duty credit issues, reversal of credit on removed sheets, interpretation of relevant rules, and the application of the Act in determining the demand raised, providing a comprehensive understanding of the legal aspects involved in the case.