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2014 (11) TMI 26 - AT - Central ExciseCenvat Credit - removal of goods after processing - exempted goods or not - Process of slitting and pickling by the appellant and are converted into HR slitted and pickled coils - Whether process amounts to manufacture or not - whether when activities of cutting or slitting of steel sheet in coil is considered as not amounting to manufacture is these any justification to allow Cenvat credit on inputs to pass the same ultimately to the buyers - Difference of opinion - Majority order - Held that - appellant s main raw material is duty paid H.R. Coils, which are used by them for manufacture of C. R. Coils/strips, G.P. coil/sheet, PPGI Coated Coils, G.C. Sheets etc,. Some quantity of H.R.Coils in respect of cenvat credit has been taken, are subjected to the process of slitting and pickling and such slitted and pickled sheets are sold - when the Department s case is that the process undertaken by the appellant does not amount to manufacture, it amounts to saying that the appellant have cleared the cenvat credit availed inputs as such and this is something which is not prohibited, if at the time of removal of cenvat credit availed inputs, in terms of the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004, an amount equal to the cenvat credit availed is paid under an invoice issued under Rule 9 of the Central Excise Rules, 2002. There is no dispute that the amount paid by the appellant is more than the cenvat credit availed. In my view, therefore the assessee should not be penalized for paying more amount than their actual duty liability. Since Rule 3(5) itself requires that removal of cenvated inputs as such on payment of an amount equal to the cenvat credit availed has to be under an invoice issued under Rule 9 of the Central Excise Rules, 2002 and since in terms of the Rule 9(1) of the Cenvat Credit Rules, 2004, an invoice issued by a manufacturer under Rule 9 even for removal of cenvated inputs/capital goods as such is a valid document for availing cenvat credit, the Appellant s customer could avail cenvat credit on the basis of the invoices for pickled sheets issued by the appellant and as such, there is no illegality in the appellant s passing on the cenvat credit. Since the amount paid on the clearance of pickled H.R. sheets is more than the cenvat credit availed, the cenvat credit availed stands more than reversed and there is no need to recover the same again - Following decision of The Commissioner of Central Excise, Pune Versus Ajinkya Enterprises 2012 (7) TMI 141 - BOMBAY HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Whether the process of slitting and pickling of HR coils amounts to manufacture. 2. Whether the appellant is entitled to avail Cenvat credit on HR coils used in the process of slitting and pickling. 3. Whether the duty paid on the final product can be considered as reversal of Cenvat credit. 4. Applicability and interpretation of Section 5(B) of the Central Excise Act. 5. Validity of the Circulars issued by the Central Board of Excise and Customs. 6. Revenue neutrality of the entire exercise. Issue-wise Detailed Analysis: 1. Whether the process of slitting and pickling of HR coils amounts to manufacture: The Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Traders Association v. Union of India held that the process of cutting or slitting of steel sheet in coils does not amount to manufacture. This was undisputed, and the Tribunal followed this precedent, confirming that slitting and pickling do not constitute manufacturing activities. 2. Whether the appellant is entitled to avail Cenvat credit on HR coils used in the process of slitting and pickling: The appellant argued that they should be allowed to avail Cenvat credit since they paid duty on the final product. The Tribunal referenced several decisions, including CCE v. Creative Enterprises, where it was held that if the activity does not amount to manufacture, no duty should be levied, and if duty is levied, Modvat credit should not be denied. The Tribunal concluded that the credit availed by the appellant and utilized for payment of duty on the final product already stands reversed. 3. Whether the duty paid on the final product can be considered as reversal of Cenvat credit: The Tribunal cited multiple decisions, such as Vickers Systems International Ltd. v. CCE and Crompton Greaves Ltd. v. CCE, which established that when credit availed is utilized for payment of duty, it should be treated as reversal of credit. The Tribunal found that the appellant's payment of duty on the final product amounted to effective reversal of the credit. 4. Applicability and interpretation of Section 5(B) of the Central Excise Act: The Revenue argued that Section 5(B) should be considered, which allows the Central Government to issue notifications for non-reversal of credit. The Tribunal, however, clarified that the absence of such a notification does not prevent the appellant from contesting the issue on merits. The Tribunal emphasized that judicial precedents must be followed regardless of the absence of a notification under Section 5(B). 5. Validity of the Circulars issued by the Central Board of Excise and Customs: The Tribunal reviewed Circular No. 911/1/2010-CX and Circular No. 940/1/2011-CX, concluding that these circulars cannot override judicial decisions. The Tribunal cited the Delhi High Court's decision in Faridabad Iron & Steel Traders Association, which held that quasi-judicial authorities should not be influenced by administrative instructions. 6. Revenue neutrality of the entire exercise: The Tribunal found that the entire situation was revenue neutral since the duty paid on the final product was more than the Cenvat credit availed. The Tribunal emphasized that the credit utilized for payment of duty on the final product already amounted to reversal of the credit, making further reversal unnecessary. Separate Judgment by the Member (Technical): The Member (Technical) disagreed with the Member (Judicial), arguing that the appellant should not be allowed to avail Cenvat credit as the process did not amount to manufacture. The Member (Technical) upheld the adjudicating authority's order but reduced the penalty. Final Decision: The majority decision set aside the impugned order, allowing the appeal with consequential relief to the appellant. The Tribunal concluded that the credit availed and utilized by the appellant already stood reversed, and no further reversal was required.
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