2012 (4) TMI 505 - AT - Central Excise

CENVAT Credit - Printing of bags - Held that - The case of the department is that the process undertaken by the appellant unit i.e. printing of polypropylene woven bags does not amount to manufacture and hence they are not eligible for Cenvat credit. However, Rule 3(5) of the Cenvat Credit Rules, 2004 provides that when the Cenvat credit availed inputs are cleared as such, an amount equal to the Cenvat credit required to be paid. Then even if the department s stand that process undertaken by the appellant does not amount to manufacture is accepted, this would have to be treated as clearance of Cenvat credit availed input as such. Since the appellant have paid duty on the printed P.P. bags the Cenvat credit availed would have to be treated as reversed. In view of this, impugned order demanding the Cenvat credit along with interest and imposed penalty on the appellant is set aside - Decided in favour of assessee.

Summary

Issues:
- Eligibility for Cenvat credit on the process of printing polypropylene woven bags at the Satna unit.

Analysis:
The case involved a dispute regarding the eligibility of Cenvat credit for a unit engaged in the printing of polypropylene woven bags at a factory in Satna, Madhya Pradesh. The Commissioner had confirmed a Cenvat credit demand against the unit, contending that the process of printing did not amount to manufacture, thus disqualifying them from the credit. The appellant challenged this decision through an appeal, seeking to overturn the order-in-original issued by the Commissioner.

During the hearing, the appellant's counsel argued that despite the printing process not constituting manufacture, the unit should still be allowed to clear the printed bags on payment of duty, effectively reversing the Cenvat credit availed on the inputs. The departmental representative, on the other hand, supported the Commissioner's findings and upheld the decision disallowing the Cenvat credit for the printing process.

After considering the arguments from both sides and examining the record, the tribunal noted that Rule 3(5) of the Cenvat Credit Rules, 2004 stipulates that when Cenvat credit availed inputs are cleared as such, an amount equal to the credit must be paid. Therefore, even if the printing process did not amount to manufacture, the Cenvat credit availed on the inputs used in the process would have to be treated as reversed since duty had been paid on the printed bags. Consequently, the tribunal set aside the impugned order that demanded Cenvat credit repayment along with interest and penalties, ruling in favor of the appellant.

In conclusion, the tribunal allowed the appeal and stay application, emphasizing that despite the printing process not meeting the threshold for manufacturing, the appellant was entitled to reverse the Cenvat credit availed on the inputs due to the duty payment on the printed bags. The judgment clarified the application of Rule 3(5) in such scenarios and provided relief to the appellant by overturning the Commissioner's decision.