2011 (9) TMI 307 - AT - Central Excise

Rule 3(4) of Cenvat Credit Rules - availing benefit of Cenvat credit of duty paid on various items, which were not inputs for the manufacture of final product - appellants was also claiming Cenvat credit in respect of plate cutting - Revenue was of the view that plate cutting is removal of inputs as such . Inasmuch as the activity undertaken by them does not amount to manufacture - As decided in the case of Faridabad Iron & Steel Traders Association vs. UOI 2003 -TMI - 47160 - HIGH COURT OF DELHI that process of cutting or slitting sheets in coil form to specific sizes does not amount to manufacture as no new, different and distinct article having distinct name, character and use emerges - Held that cutting of plates does not amount to manufacture - Appelant are required to pay duty equal to the credit taken - Appeal rejected.

Summary

Issues:
- Availing of Cenvat credit on non-input items
- Claiming Cenvat credit on plate cutting
- Demand of duty raised
- Imposition of penalty under Cenvat Credit Rules, 2002

Availing of Cenvat credit on non-input items:
The appellants, engaged in manufacturing rolled products, were found to be availing Cenvat credit on items not used as inputs for the final product. The Central Excise officers raised a demand of duty amounting to Rs. 1,97,369 in this regard. Additionally, the appellants were claiming Cenvat credit on plate cutting activities, which the Revenue considered as not constituting manufacturing. A demand of duty of Rs. 41,695 was raised concerning this issue.

Claiming Cenvat credit on plate cutting:
The Asst. Commissioner confirmed the demand raised in the show cause notice and imposed a penalty of Rs. 15,000 under the Cenvat Credit Rules, 2002. On appeal, the Commissioner (Appeals) noted that the appellants had already reversed the amount of Rs. 1,97,369. However, regarding the plate cutting issue, he observed that the process undertaken did not amount to manufacturing, and the clearance of plate cuttings was considered as removal of inputs 'as such.' The Commissioner confirmed a differential duty of Rs. 41,695 but set aside the penalty.

Judgment and Analysis:
The Hon'ble Delhi High Court's decision in the case of Faridabad Iron & Steel Traders Association vs. UOI was cited, stating that the process of cutting plates to specific sizes does not amount to manufacturing as it does not result in a new, distinct article. This decision was upheld by the Hon'ble Supreme Court. Considering this legal precedent, the Tribunal held that cutting of plates does not constitute manufacturing, and therefore, the appellants were required to pay duty equal to the credit taken under Rule 3(4) of the Cenvat Credit Rules, 2002. Consequently, the Tribunal rejected the appeal, affirming the Commissioner (Appeals)'s decision.

This judgment clarifies the distinction between manufacturing activities and mere processing, emphasizing the criteria for determining when a process amounts to manufacturing under the Cenvat Credit Rules, 2002. The legal precedent set by the Delhi High Court and the Supreme Court played a crucial role in shaping the outcome of this case, highlighting the significance of established case law in interpreting statutory provisions.