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2011 (4) TMI 899 - AT - Central ExciseRevoking of central excise registration - not engaged in manufacturing activity - involved in slitting of jumbo aluminium foils into blister form rolls of the required sizes and thereafter printing them in multi colour - Held that - The issue is no more res-integra already stands concluded by the decision of the Apex Court in CCE, New Delhi-I vs. S.R. Tissues Pvt. Ltd. 2005 (8) TMI 111 - SUPREME COURT OF INDIA as process of slitting /cutting of jumbo roll of plain tissue paper into smaller size would not amount to manufacture on the first principals as well as under Section 2(f) of the said Act. Recovery of wrongfully availed cenvat credit - Held that - Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same alongwith interest would be recovered from the manufacturer or the provider of the output service - It is also well settled that first attempt should be made by the courts to uphold the charged provision and not to invalidate it merely because one of the possible interpretations leads to such a result, howsoever attractive it may be - the attempt of the High Court to read down the provision by way of substituting the word OR by an AND so as to give relief to the assessee is found to be erroneous - appeal decided against assessee.
Issues Involved:
1. Whether the conversion of plain aluminum foil in jumbo rolls into blister rolls for packing medicine and items by the process of cutting, slitting, and printing amounts to manufacture under Section 2(f) of the Central Excise Act, 1944. 2. Whether the appellants are entitled to avail CENVAT credit on inputs used in the final product. 3. Whether the appellants are liable to pay interest on the wrongfully availed CENVAT credit. 4. Whether the appellants are liable to pay penalties for the wrongful availment and utilization of CENVAT credit. Detailed Analysis: 1. Whether the conversion of plain aluminum foil in jumbo rolls into blister rolls for packing medicine and items by the process of cutting, slitting, and printing amounts to manufacture under Section 2(f) of the Central Excise Act, 1944: The term "manufacture" under Section 2(f) includes any process incidental or ancillary to the completion of a manufactured product. The appellants argued that their process of cutting jumbo rolls into smaller sizes, printing details as per customer requirements, and applying a chemical coating (HSL) amounts to manufacturing. They contended that the final product, blister rolls, is commercially distinct from the input aluminum foil. However, the Tribunal referred to several precedents, including the Supreme Court's decision in CCE, New Delhi-I vs. S.R. Tissues Pvt. Ltd. (2005), which held that slitting/cutting jumbo rolls into smaller sizes does not amount to manufacture. Similarly, in Union of India vs. J.G. Glass Industries Ltd. (1998), it was held that printing on glass bottles does not amount to manufacture. The Tribunal concluded that the process undertaken by the appellants does not amount to manufacture under Section 2(f). 2. Whether the appellants are entitled to avail CENVAT credit on inputs used in the final product: The appellants claimed that since duty had been paid on the final product, they should be entitled to CENVAT credit for the inputs used. They argued that denying this credit would contradict the legislative intent to avoid the cascading effect of taxation. However, the Tribunal noted that since the process does not amount to manufacture, the appellants are not entitled to CENVAT credit. The Tribunal cited precedents such as CCE vs. Swaraj Mazda Ltd. (2004) and Shree Ram Packaging vs. CCE (2003), which held that no credit is admissible in the absence of a manufacturing process. 3. Whether the appellants are liable to pay interest on the wrongfully availed CENVAT credit: The appellants contended that since the credit had already been utilized for payment of duty on the final product, the provision regarding the levy of interest was not attracted. However, the Tribunal referred to the Supreme Court's decision in Union of India vs. Ind-Swift Laboratories Ltd. (2011), which held that interest is payable on wrongfully availed CENVAT credit from the date it was taken or utilized. The Tribunal emphasized that Rule 14 of the CENVAT Credit Rules mandates the recovery of such credit along with interest. 4. Whether the appellants are liable to pay penalties for the wrongful availment and utilization of CENVAT credit: The appellants argued that they had a bona fide belief about the excisability of their final product and validly availed and utilized the credit. Hence, they should not be subjected to penalties. However, the Tribunal found that the appellants' actions were in contravention of the provisions of the CENVAT Credit Rules, 2004. The Tribunal upheld the imposition of penalties, reiterating that the appellants wrongfully availed and utilized the credit. Conclusion: The appeal was dismissed, affirming the adjudicating authority's order. The Tribunal held that the process undertaken by the appellants does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. Consequently, the appellants are not entitled to CENVAT credit on inputs used in the final product. They are also liable to pay interest on the wrongfully availed credit and penalties for their actions.
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