2012 (10) TMI 925 - AT - Central Excise

Duty demand - CENVAT Credit - process of printing of bags - Held that - appellant had taken Cenvat credit of the duty on polypropylene bags and treating these process of printing of plain bags as amounting to manufacture, had paid duty on the transaction value of the printed bags. It is not disputed that the duty paid on printed bags is more than the Cenvat credit availed in respect of inputs. Even if department s contention that the process undertaken by the appellant does not amount to manufacture is accepted, it would amount to clearance of cenvated inputs as such in respect of which the provision of Rule 3(5) of the Cenvat Credit Rules, 2004 would be applicable and in respect of such clearances an amount equal to the Cenvat credit taken would be payable. In this case there is no dispute that in respect of clearances of printed bags, an amount more than the Cenvat credit availed has been paid. In view of this, we are of view that there is no justification for Cenvat credit demand - Decided in favour of assessee.

Summary

Issues:
Dispute over whether the process of printing polypropylene bags amounts to manufacture, eligibility for Cenvat credit, and imposition of penalty.

Analysis:
The case involved a dispute regarding the process of printing polypropylene bags at a unit in Satna. The appellant considered this process as manufacturing, paying central excise duty on the printed bags and availing Cenvat credit on inputs. The Department disagreed, issuing a show cause notice for recovery of allegedly wrongly taken Cenvat credit. The Additional Commissioner confirmed the demand and imposed a penalty, which was reduced by the Commissioner (Appeals). Both parties appealed the decision.

During the hearing, the appellant argued that the process was akin to manufacturing, citing precedents. They contended that even if the process did not amount to manufacture, the duty paid on printed bags exceeded the Cenvat credit availed, eliminating the need for demanding Cenvat credit again. On the other hand, the Department defended the decision, asserting that the appellant was not eligible for Cenvat credit due to the nature of the process and criticized the penalty reduction.

Upon review, the Tribunal found that the duty paid on the printed bags exceeded the Cenvat credit availed, even if the process was not classified as manufacturing. Therefore, the provision of Rule 3(5) of the Cenvat Credit Rules, 2004 applied, and there was no justification for demanding Cenvat credit. The impugned order was deemed unsustainable, set aside, and the appeal and stay application of the Appellant were allowed, while the appeal filed by the Revenue was dismissed.