2014 (9) TMI 658 - AT - Central Excise

CENVAT Credit - Activity amount to manufacture of not - Cutting and slitting of coils - Held that - Appellants are not merely undertaking the activity of cutting and slitting of coils, but they are doing the activity of putting of layer of plastic for improving drawability of material, and applying inter-leaving paper for protection of the material so as to be fit for end use application. - process undertaken by the party is not mere cutting and slitting of coil but various process, which are ancillary to completion of manufacturing process, are undertaken which is precision in nature in completion of the end product as a distinct product. - Various processes as explained supra carried out is not for the purpose to cut the big coils, into small one for trade purpose; that the intent here is to customize specifically against OEM s requirements pertaining to specific end usage, without this specific customization, the OEM cannot go ahead in the manufacturing of various products. - Decided in favor of assessee. Period of limitation - Held that - Appellant has taken registration in 2006 by declaring their activity to the department and they were granted the registration. They are regularly filing their Central Excise Returns showing availment of Cenvat credit on capital goods, inputs and input services. They are also showing the fact that they are paying duty by utilising the Cenvat credit as well as through PLA on the finished product as well as the scrap arising during the course of manufacture. Therefore, the extended period of limitation cannot be invoked. Accordingly, on limitation the appellants are having a good case. Further, we find that for the period which is within limitation, the appellant has discharged duty through PLA also as well as by availing the Cenvat credit, which means they have paid more duty than the Cenvat credit availed. In these circumstances, relying on the decision of Ajinkya Ent. (2012 (7) TMI 141 - BOMBAY HIGH COURT), we hold that appellants are not liable to pay duty, as the duty paid by them on the finished goods shall be treated as reversal of the Cenvat credit during the said period. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the activity undertaken by the appellant amounts to manufacture.
2. Whether the extended period of limitation can be invoked.
3. Whether the duty paid by the appellant can be treated as reversal of Cenvat credit.

Issue-wise Detailed Analysis:

1. Whether the activity undertaken by the appellant amounts to manufacture:

The appellants are engaged in cutting and slitting of coils, coating and layering with plastic for improving drawability, and applying inter-leaving paper for protection. The preventive department observed that these activities do not amount to manufacture, leading to the issuance of show-cause notices and denial of Cenvat credit on capital goods, inputs, and input services. The appellant argued that their activities were declared at the time of registration and were consistent with the activities that were adjudicated as manufacturing in their Gurgaon division. The appellant cited similar cases (Bhushan Steel Ltd. and Surya Roshni Ltd.) where such activities were held to amount to manufacture. The Tribunal examined Section 2(f) of the Central Excise Act, 1944, which defines "manufacture" and concluded that the appellant's activities, including PVC coating and applying inter-leaving paper, were ancillary to the completion of a manufactured product. The Tribunal referred to the Supreme Court's decision in S.D. Fine Chemicals P. Ltd., which supports the expansive definition of "manufacture."

2. Whether the extended period of limitation can be invoked:

The appellant contended that the extended period of limitation is not applicable as they had taken registration in 2006, declared their activities, and regularly filed Central Excise Returns. The Tribunal agreed, noting that the appellant had disclosed all relevant information to the department, and thus, there was no suppression of facts. Consequently, the extended period of limitation could not be invoked.

3. Whether the duty paid by the appellant can be treated as reversal of Cenvat credit:

The appellant argued that even if their activities did not amount to manufacture, they had paid more duty than the Cenvat credit availed during the limitation period. The Tribunal agreed, citing the Bombay High Court decision in Ajinkya Enterprises, which held that duty paid on finished goods can be treated as reversal of Cenvat credit. Therefore, the appellant was not liable to pay additional duty.

Conclusion:

The Tribunal concluded that the appellant's activities amounted to manufacture, the extended period of limitation could not be invoked, and the duty paid by the appellant should be treated as reversal of Cenvat credit. Consequently, the appeals were allowed, and the impugned orders were set aside.