2013 (6) TMI 610 - AT - Central Excise

Cenvat credit - CR Coils - revenue denied the credit on the ground that credit of Cenvat was not admissible since the activity of de-coiling of HR/CR coils and cutting & slitting thereof into specific sizes as per the design of M/s. Twin Metal Products Pvt. Ltd. (SEZ Unit) and carrying out pickling and oiling did not amount to manufacture. - Held that - in the case in hand before us, the appellants were undertaking composite activity of de-coiling of HR/CR coils thereafter cutting and slitting into specific sizes and after that pickling and oiling taken place, which was clarified by the department only on 24-6-2010 saying that the said activity does not amount to manufacture. Therefore, following instructions issued through Circular No. 911/1/2010-CX., dated 14-1-2010, the appellants approached to the Commissioner for issuance of appropriate rectification for regularization of the CENVAT credit availed as their activity does not amount to manufacture and they have paid duty on clearance of the goods more than the credit availed. The Commissioner has also considered the representation of the appellant and forwarded to the Board for issuance of the required notification. The Board has neither rejected the proposal of the Commissioner, nor issued the notification for regularization of credit availed. In that situation, we are of the view that the benefit of the Circular No. 911/1/2010-CX., dated 14-1-2010 is available to the appellants. As per Rule 3(5) of the Cenvat Credit Rules, 2004, if the activity in question of the appellants does not amount to manufacture, the appellants are required to pay duty equal to credit taken on clearance of such inputs under cover of Central Excise invoices. As in this case, the activity of the appellants does not amount to manufacture, therefore, these inputs are cleared as such. In that event, as per Rule 3(5) of Cenvat Credit Rules, 2004 the appellants are required to pay duty equal to the credit taken thereon and the appellants have paid duty more than the credit availed. The duty paid by the appellants has been accepted by the department which is admittedly more than the CENVAT credit availed by the appellants. Therefore, we hold that the appellants are not required to reverse the credit. - Credit allowed - Decided in favor of assessee.

Issues Involved:
1. Denial of Cenvat credit on the grounds that the process undertaken did not amount to manufacture.
2. Rejection of refund claims related to supplies made to SEZ units.
3. Appropriateness of duty paid on goods supplied to SEZ units.
4. Clarification and applicability of various Circulars issued by C.B.E. & C.
5. Legal alternatives and compliance with Cenvat Credit Rules.

Issue-wise Detailed Analysis:

1. Denial of Cenvat Credit:
The primary issue revolves around whether the processes of de-coiling, cutting, slitting, pickling, and oiling HR/CR coils amount to manufacture. The adjudicating authorities denied Cenvat credit, citing that these activities did not constitute manufacturing. The appellants argued that based on previous Circulars and judicial pronouncements, their activities should be considered manufacturing. They referenced Circular No. 584/21/2001-CX., which was later withdrawn, and Circular No. 911/1/2010-CX., which clarified that such activities did not amount to manufacture. The Tribunal concluded that since the appellants had paid more duty than the credit availed, the denial of Cenvat credit was not justified.

2. Rejection of Refund Claims:
The appellants' refund claims were rejected on the same grounds that the activities did not amount to manufacture. The Tribunal noted that the appellants' activities were in compliance with Rule 3(5) of the Cenvat Credit Rules, 2004, and that the duty paid was higher than the credit taken. Therefore, the rejection of refund claims was deemed improper.

3. Appropriateness of Duty Paid:
The Tribunal examined whether the duty paid on the final products, which was more than the credit availed, could be considered as proper and legal. The Tribunal cited several judicial precedents, including Crompton Greaves Ltd. and Vickers Systems International Ltd., to support the view that when duty paid is equal to or higher than the credit availed, it should be treated as a reversal of credit. Consequently, the duty paid by the appellants was deemed appropriate.

4. Clarification and Applicability of Circulars:
The appellants argued that they had sought clarification from the Department multiple times regarding whether their activities amounted to manufacture. The Department's clarification came only in 2010, long after the period in question. The Tribunal acknowledged this delay and held that the appellants' actions were in line with the Circulars and judicial pronouncements available at the time. Therefore, the appellants' payment of duty and availing of credit were considered proper.

5. Legal Alternatives and Compliance with Cenvat Credit Rules:
The appellants presented several legal alternatives to justify their actions, including compliance with Rule 3(5) of the Cenvat Credit Rules and Rule 16 of the Central Excise Rules, 2002. They also argued that they could have obtained dealer registration and issued cenvatable invoices. The Tribunal found these arguments valid and noted that the appellants had indeed paid more duty than the credit availed, thus complying with the relevant rules.

Conclusion:
The Tribunal concluded that the appellants were not required to reverse the Cenvat credit as they had paid more duty than the credit availed. The appeals were allowed with consequential relief, and the Tribunal emphasized that the appellants' actions were in compliance with the applicable rules and judicial pronouncements. The decision was pronounced in court on 23-6-2011.

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