2016 (11) TMI 1503 - HC - Central Excise

CENVAT credit - input - Manufacture - it appears that the respondent is manufacturing Hot Rolled Coils (HR Coils) inputs of which are being purchased from Tata Steel and the respondent is only carrying out process upon the said raw materials and is converting the said raw materials into HR Coils - Held that - HR Coils, the goods which are prepared by the respondent, is not an exempted goods at all as per definition given under Rule 2(d) of the Cenvat Credit Rules, 2004. Hence, there is no applicability of Rule 6(1) of the Cenvat Credit Rules, 2004, whatsoever arises - Moreover, it appears that the preparation of the HR Coils by the respondent is not manufacturing of goods at all, because, it is simply cutting, slitting and strengthening of HR Coils purchased from Tata Steel. Appeal dismissed - decided against appellant.

Summary

Issues:
Whether an assessee, ceasing to be a manufacturer of excisable goods, is permitted to take Cenvat Credit on goods received for further processing?

Analysis:
The judgment discusses whether an assessee, who ceased to be a manufacturer of excisable goods, could take Cenvat Credit on goods received for processing. The respondent was converting raw materials into Hot Rolled Coils (HR Coils) purchased from Tata Steel. The court referred to previous decisions stating that the process of converting raw materials into HR Coils did not amount to manufacturing under the Cenvat Credit Rules. The appellant argued that the respondent wrongly availed Cenvat credit on exempted goods, leading to a penalty imposed by the Commissioner of Central Excise. However, the CESTAT, Kolkata allowed the respondent's appeal, emphasizing that HR Coils were not exempted goods under the Cenvat Credit Rules.

The judgment highlighted that the respondent had paid duty on the HR Coils and did not claim a refund, as they had already recovered the tax from purchasers. The Cenvat Credit availed was less than the duty paid, causing no loss to the Union of India. The court noted that the Commissioner of Central Excise did not properly consider these aspects while imposing the penalty. The CESTAT, Kolkata correctly appreciated these points, leading to the allowance of the respondent's appeal. The court concluded that the Circular dated 2-3-2005 did not apply as HR Coils were not exempted goods under the Cenvat Credit Rules. Therefore, the court dismissed the appeal, stating that the question raised had already been answered, and there was no substance in the appeal.