2006 (10) TMI 373 - AT - Central Excise

Summary

Issues involved:
The issue involves whether the appellants, who are manufacturers of steel tubes and pipes, are required to reverse the Cenvat credit availed on the pipes cleared by them on payment of duty, as directed by the Department, or if they can retain the credit based on the process undertaken by them. The contention is based on previous Tribunal judgments and the applicability of revenue neutrality in the present case.

Issue 1: Reversal of Cenvat credit
The Department directed the appellants to reverse the Cenvat credit or pay the amounts as the process undertaken by them did not amount to the process of manufacture. The appellant contested this directive, citing previous Tribunal judgments which held that in cases where duty has been paid on Cenvat goods later held to be non-dutiable, the Cenvat credit was not required to be reversed. The Tribunal clarified this position in various judgments, establishing that the Cenvat credit can be retained in such circumstances.

Issue 2: Applicability of previous judgments
The learned Counsel for the appellant relied on an Apex Court judgment and previous Tribunal decisions to support their argument. They emphasized that the duty paid would need to be refunded, leading to revenue neutrality in the current case. On the other hand, the Department reiterated its view that the Cenvat credit should be reversed.

Judgment:
Upon careful consideration of the arguments and previous judgments, the Tribunal found that the assessee is not required to reverse the Cenvat credit availed on the pipes cleared by them. The Tribunal noted that the value addition carried out by the assessee justified the Cenvat credit paid, and there was revenue neutrality in this case. The Tribunal also highlighted that Cenvat credit can be retained on duty paid wires even if the process did not amount to manufacture, which was similar to the situation in the present case. Therefore, the impugned order directing the reversal of Cenvat credit was set aside, and the appeal was allowed with consequential relief, if any.