2007 (7) TMI 512 - AT - Central Excise

Cenvat/Modvat - Inputs - Demand - Manufacture - Held that - the appellants have paid more duty than the credit they have taken, the impugned demand is not sustainable in respect of the credit taken - since Section 11D applies to a person who is liable to pay Excise duty, no demand can be raised under the same against the appellants when the process applied by them does not to manufacture and hence the appellants are not manufacturers and hence not in the category of a person who is required to pay excise duty - appeal allowed.

Summary

Issues:
1. Whether cutting and slitting of HR/CR Coils into sheets amounts to manufacture.
2. Whether the appellants are liable to pay duty on the sheets.
3. Whether the appellants are required to pay any amount against irregularly availed credit.
4. Applicability of Section 11D in the given scenario.

Analysis:
1. The appellants received HR/CR Coils of iron and steel, cut and slit them into sheets for M/s. SAIL's customers. The Board's circular clarified that such activity does not amount to manufacture, as per the Delhi High Court's order upheld by the Supreme Court. The appellants continued taking credit and paying duty on the sheets due to ignorance of the circular during the impugned period.

2. The consultant for the appellants argued that since duty paid on the sheets exceeded the credit taken, no additional payment was necessary. Citing legal precedents, including the Narmada Chematur Pharmaceuticals Ltd. case and the Shree Krishna Industries case, it was contended that when duty paid equals credit taken, there is no revenue implication, and Section 11D does not apply if the process is not considered manufacturing.

3. The Tribunal found merit in the consultant's argument, noting that the appellants had paid more duty than the credit availed. Consequently, the demand for payment against the credit taken was deemed unsustainable. Moreover, since Section 11D pertains to those liable to pay excise duty, and the appellants were not considered manufacturers due to the non-manufacturing process, no demand could be raised against them under Section 11D.

4. Considering the legal principles and the appellants' situation, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellants. The decision highlighted that the appellants were not manufacturers and thus not obligated to pay excise duty, ultimately absolving them from the demand raised under Section 11D.