2013 (7) TMI 371 - AT - Central Excise

Cenvat Credit Payment of duty on non excisable goods - When the process does not amount to manufacture Held that - As per the decision of this Tribunal in the case of Ajinkya Enterprises 2013 (6) TMI 610 - CESTAT MUMBAI wherein this Tribunal held that although the activity undertaken by the appellant does not amount to manufacture but when they have cleared their finished product on payment of duty, the same may be treated as reversal of Cenvat Credit availed on inputs - Assessee are not required to reverse the Cenvat Credit as they have already paid duty on their clearances. In favor of Assessee. Extended period of limitation Held that - As the activity undertaken by the appellant was in the knowledge of the department, the extended period of limitation is not invokable.

Summary

Issues:
1. Denial of input credit on inputs
2. Activity undertaken by the appellant not amounting to manufacture
3. Imposition of redemption fine
4. Extended period of limitation for issuing Show Cause Notice

Analysis:
1. The appellants appealed against an order demanding duty, interest, and penalty due to the denial of input credit on inputs secured by them during October 2006 to March 2009. The contention was that the activity undertaken by the appellant did not amount to manufacture, leading to the imposition of a redemption fine of Rs. 94 lakhs.

2. The appellant's counsel argued that they had applied for registration in August 2006, responded to queries raised by the jurisdictional Dy. Commissioner, and were granted registration after the officer visited their factory and understood their activities. The appellant procured inputs, took credit, and cleared final products on payment of duty. The revenue contended that the activity did not amount to manufacture, and the appellant had already paid duty on the final product, thus requiring reversal of Cenvat Credit as per a previous Tribunal case.

3. The Additional Commissioner opposed the appellant's contention, stating that the cutting and packing activity did not constitute manufacture, and there was no activity during the officer's visit, suggesting misrepresentation for seeking registration.

4. The Tribunal found that the appellant explained the process, was granted registration, procured inputs, cleared goods on payment of duty, and had not undergone an audit to determine if the activity amounted to manufacture. Since the department was aware of the activity, the extended period of limitation for issuing the Show Cause Notice was deemed inapplicable. Referring to a previous Tribunal decision, the Tribunal ruled that even if the activity did not amount to manufacture, clearing finished products on duty payment could be considered as a reversal of Cenvat Credit on inputs.

5. Consequently, the Tribunal held that the appellants were not required to reverse the Cenvat Credit as they had paid duty on clearances and had a strong case regarding the limitation period. The impugned order was set aside, and the appeal was allowed with any consequential relief.