2015 (2) TMI 790 - AT - Central Excise

CENVAT Credit - processing of membrane/disc imported for water filter system - processing repacking after adding some features and sold the same as membrane - manufacturing activity or not - appellant was under the bona fide belief that the activity undertaken by them amounted to manufacture and, therefore, they discharged excise duty liability on the membrane so cleared. They also availed CENVAT Credit of the CVD and SAD paid on the imported membrane for discharging excise duty liability - Whether the appellant has paid the excise duty on the membrane cleared by them and amounts so paid is more than the credit taken by the appellant in respect of CVD and SAD paid on imported membrane - Held that - In their reply to the show-cause notice, the appellant had specifically mentioned that the excise duty liability discharged by them on the membranes cleared is more than the credit taken of CVD and SAD. However, the adjudicating authority has not given any finding in respect of this contention made by the appellant. Therefore, even in a case where the activity did not amount to manufacture, the appellant was not required to reverse any credit. However, the adjudicating authority has not considered this aspect; therefore, the matter has to go back to the adjudicating authority to verify whether the excise duty liability discharged by the appellant on the process of manufacture undertaken is more than the credit taken in respect of the CVD and SAD on such membranes. If it is found that the appellant has paid more excise duty, then the question of reversal of credit would not arise in the light of the various decisions in the case of Creative Enterprises 2008 (7) TMI 311 - GUJARAT HIGH COURT , Ajinkya Enterprises 2012 (7) TMI 141 - BOMBAY HIGH COURT and Narmada Chematur Pharmaceuticals Ltd. (2004 (12) TMI 93 - SUPREME COURT OF INDIA). - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Duty demand confirmation under Central Excise Act and Cenvat Credit Rules.
2. Eligibility of appellant for CENVAT Credit on imported membrane.
3. Discrepancy in excise duty paid and credit taken.
4. Whether the activity undertaken amounts to manufacture.
5. Disposal of appeal and stay petition.

Analysis:
1. The judgment addresses the appeal against the duty demand confirmation under the Central Excise Act and Cenvat Credit Rules. The appellant, a company, imported membrane/disc for a water filter system, treated and repacked it, believing it amounted to manufacture, discharging excise duty liability accordingly. However, the department disagreed, issuing a show-cause notice for recovery of ineligible CENVAT Credit on the SAD paid on the imported membrane. The appellant argued that the excise duty paid exceeded the CENVAT Credit of additional customs duty and SAD, citing relevant court decisions in support.

2. The issue of the appellant's eligibility for CENVAT Credit on the imported membrane was raised. The appellant contended that they had paid more excise duty than the credit taken on the CVD and SAD, providing evidence to support their claim. However, the adjudicating authority did not address this contention. The judgment emphasized the need for verification by the authority to determine if the excise duty paid exceeded the credit taken, highlighting the relevance of previous court decisions in similar cases.

3. The discrepancy between the excise duty paid by the appellant and the credit taken on the imported membrane was a crucial aspect of the judgment. The appellant asserted that they had discharged more excise duty than the credit availed, but this claim was not addressed by the adjudicating authority. The judgment emphasized the necessity for the authority to verify this aspect and consider the appellant's submissions before making a decision on the reversal of credit.

4. The judgment also delved into whether the activity undertaken by the appellant amounted to manufacture. While the appellant claimed to have undertaken processes on the imported membranes, the judgment noted that prima facie, the activity did not result in a new product with distinct characteristics. The issue of whether the activity constituted manufacture was left open for further evidence to be presented before the adjudicating authority.

5. Ultimately, the appeal was allowed by way of remand, indicating that the matter would be sent back to the adjudicating authority for verification of the excise duty paid versus credit taken, and for consideration of whether the activity amounted to manufacture. The stay petition was also disposed of in the judgment, providing a comprehensive resolution to the issues raised in the case.