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2007 (8) TMI 542 - AT - CustomsMarble slabs - Countervailing duty (Additional Customs Duty) - Manufacture - Refund - Cenvat/Modvat credit - Held that - Since the appellants were not required to pay duty at all on the polished marble slabs for the reason that the activity carried out by them does not amount to manufacture, whatever credit has been taken and utilised for payment of CVD on the marble slabs should be treated as reversal of credit itself - However, since the imported marble slabs are not liable to levy of countervailing duty, the question of holding that CV duty has been paid on goods falling under CET sub-heading 2504.21 is erroneous and hence the restriction contained in Rule 3(6)(i)(c) of the Cenvat Credit Rules, 2002 does not cover the present case - appeal allowed in part.
Issues Involved:
1. Classification of imported honed marble slabs. 2. Determination of whether the process of cutting and polishing marble slabs amounts to manufacture. 3. Eligibility for Cenvat credit and the applicability of Rule 3(6)(i)(c) of the Cenvat Credit Rules, 2002. 4. Levy of Countervailing Duty (CVD) on imported marble slabs. 5. Refund of CVD and the application of the doctrine of unjust enrichment. Detailed Analysis: 1. Classification of Imported Honed Marble Slabs: The appellants imported honed marble slabs and claimed exemption from Customs duty under Notification 26/2000-Cus., asserting Sri Lankan origin. The department contended that the correct classification was under CET sub-heading 2504.21, attracting 16% duty. The appellants misdeclared the heading as 6807.90 to avail full CVD credit, bypassing restrictions under the Cenvat Credit Rules. The Commissioner (Appeals) upheld the classification under 2504.21, leading to the appeal. 2. Manufacture and Excise Duty Liability: The appellants relied on a prior Tribunal order stating that cutting and polishing marble slabs with fiber glass reinforcement does not constitute manufacture, thus not attracting excise duty. A show cause notice demanded recovery of Cenvat credit availed during August 2003 to March 2004. The Commissioner of Central Excise adjudicated that the goods fell under CET sub-heading 2504.21, restricting Cenvat credit to Rs. 30/- per sq. mtr. and disallowing the entire credit, ordering recovery with interest and penalty. 3. Cenvat Credit and Rule 3(6)(i)(c) Applicability: The Tribunal examined Chapter Heading 25.04 and relevant case law, particularly the Supreme Court's decision in Aman Marble Industries, which held that cutting marble blocks into slabs does not amount to manufacture. This precedent implies no new commodity is created, thus no excise duty is applicable. Consequently, the levy of CVD under Section 3 of the Customs Tariff Act is not attracted, as it requires imagining the goods as manufactured in India. 4. Countervailing Duty (CVD) on Imported Marble Slabs: The Tribunal referenced the Supreme Court's decisions in Hyderabad Industries and TISCO, affirming that CVD cannot be levied if the process does not amount to manufacture. Since marble slabs' processing does not constitute manufacture, no CVD is leviable. The appellants had taken Cenvat credit of CVD paid, making them ineligible for a refund of the CVD. 5. Refund of CVD and Unjust Enrichment: The Tribunal concluded that since no CVD is leviable on imported marble slabs, the appellants are entitled to a refund of CVD paid. The doctrine of unjust enrichment does not apply as the CVD paid was taken as credit and did not form part of the final product's cost. The refund should be granted as credit to the appellants' Cenvat credit account, ensuring revenue neutrality. Recovery of credit on the grounds of non-manufacture is invalid, and credit taken should be treated as a reversal of credit. Conclusion: The Tribunal allowed the appeal, holding that no CVD is leviable on imported marble slabs and setting aside the recovery of Cenvat credit. The refund of CVD should be credited to the appellants' Cenvat credit account, maintaining revenue neutrality. The order dated 8-11-2006 by the Commissioner of Central Excise was set aside, and both appeals were allowed as per the above terms.
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