2012 (8) TMI 691 - AT - Central Excise

Denial of cenvat credit - manufacturer of steel tubular poles - Held that - Consedering the entire process it is evident that the MS black Tube/pipes as initially procured cannot be termed as pipe/tube of specific diameter and this product cannot be sold in the market as pipe/tube which are inputs for manufacture of steel tubular pole. Thus after the processing pipe/tube a distinct product comes into being which is known in the commercial parlance as steel tubular pole which has character and was distinct from MS black Tube/pipes. This process amounts to manufacture and as such no merit in the plea of the Department that steel tubular poles cleared on payment of duty by the respective assessees were not leviable with excise duty. As the appellants used duty paid inputs for the production of their final product which was cleared to the customers on payment of excise duty & department having accepted the excise duty on the final product cannot be permitted to deny cenvat credit on the inputs used for the manufacture of the final product on such a technical plea - in favour of assessee.

Summary

Issues:
- Whether the process of production of the pole amounts to manufacture for levy of excise duty.
- Justification of denying cenvat credit despite accepting excise duty on cleared goods.

Analysis:
1. Manufacturing Process and Excise Duty:
The appeals involved a common issue where the Revenue challenged the Commissioner (Appeals) order setting aside duty demands based on denial of cenvat credit availed by the respondents. The respondents, manufacturers of steel tubular poles, cleared the final products on duty payment and availed cenvat credit on inputs. The dispute arose when the Department contended that the poles produced were not a result of a manufacturing process, citing a Supreme Court judgment. The manufacturing process involved procuring M.S. Black pipes, swaging, welding, and finishing to create steel tubular poles.

2. Interpretation of Manufacturing Process:
The main question revolved around whether the production process constituted manufacturing for excise duty purposes. The Department argued that swaging and welding pipes did not amount to manufacturing, thus poles were not liable for excise duty. However, the respondents contended that the process resulted in a distinct product - electric poles - separate from the input pipes. They relied on a Supreme Court judgment to support their claim. The Tribunal analyzed the fabrication process and concluded that the final product, steel tubular poles, was distinct from the input pipes, meeting the definition of manufacture. The judgment in Prachi Industries case supported this view.

3. Cenvat Credit Denial and Equity:
Even if the final product did not strictly meet the definition of manufacture, the Tribunal found it unjust to deny cenvat credit. The Department had accepted excise duty on the cleared goods without protest, indicating acknowledgment of liability. Denying credit on a technicality would go against the principles of equity and justice. Upholding the denial would defeat the purpose of the cenvat credit scheme, designed to prevent double taxation and protect the assessee. Therefore, the Tribunal dismissed the appeals, emphasizing the importance of fairness and consistency in excise duty assessments.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, ruling that the production process of steel tubular poles constituted manufacturing, and denying cenvat credit after accepting excise duty was unjust. The judgment highlighted the importance of interpreting tax laws in a manner that upholds fairness and prevents double taxation, ultimately dismissing the appeals and stay applications.