2012 (11) TMI 359 - AT - Central Excise

Cenvat credit denial of credit availed by the applicant on the ground that process undertaken by the applicant does not amount to manufacture Held that - Applicants availed the credit and paid the duty - in case the activity of assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture - as the applicant had paid more duty than the credit availed - pre-deposit of dues are waived

Summary

Issues:
1. Waiver of pre-deposit of duty, interest, and penalty.
2. Denial of credit availed by the applicant.
3. Demand confirmed under section 11D of the Central Excise Act.
4. Interpretation of whether the activity amounts to manufacture.
5. Entitlement to credit of duty paid on inputs.
6. Application of relevant legal precedents.

Analysis:
The applicant sought a waiver of pre-deposit of duty, interest, and penalty amounting to Rs.6.04.07,759. The Revenue contested the credit availed by the applicant, arguing that the process undertaken did not constitute manufacture. Additionally, a demand of Rs.3,03,68,989 was confirmed under section 11D of the Central Excise Act, alleging that the applicant had recovered an amount as Central Excise duty which was not payable.

The applicant relied on legal precedents to support their case. They cited a decision of the Hon'ble Gujarat High Court to argue that if an activity does not amount to manufacture and duty has been paid on goods clearance, credit cannot be denied. Furthermore, they referenced a Tribunal decision to emphasize that denial of credit based on the manufacturing process does not warrant the application of section 11D of the Act.

In response, the Revenue contended that the applicant wrongly passed on the credit of duty to their customer, causing a loss to the exchequer. They argued that even if the manufacturer paid duty on inputs for exempted goods, if the process does not amount to manufacture, credit entitlement does not apply.

The Tribunal analyzed the facts and legal arguments presented. Referring to the decision of the Hon'ble Gujarat High Court, the Tribunal concluded that if an activity does not amount to manufacture, duty levy is not applicable, and credit cannot be denied. As the applicant had paid more duty than the credit availed, the Tribunal found a strong case for waiver of dues. Consequently, the pre-deposit of dues was waived, and recovery stayed during the appeal process, with the stay petition being allowed.

In summary, the judgment addressed the waiver of pre-deposit, denial of credit availed, demand under section 11D, interpretation of manufacturing activity, entitlement to credit on inputs, and application of legal precedents to support the decision in favor of the applicant.