2015 (10) TMI 902 - AT - Central Excise

Disallowance of CENVAT Credit - Bright bars - denial on the ground that Bright bars are not a commodity subject to excise duty as no process of manufacture is involved in the transformation of round bars into Bright bars - Held that - Duty was being collected upon bright bars and credit was being availed on such goods. A further trade notice dated 16/06/2004 was issued as clarification to trade notice No. 18/2003 stating that there is no process of manufacture. The demand is raised for the period after 16.6.2004. It is discussed by the Commissioner (Appeals) that the issue was contentious and involved interpretation and therefore protective demands were issued during that time. It is seen that the cases were kept pending in the call books after issuance of show cause notices. Thereafter the matter has been adjudicated and order passed after many years. This goes to show that the Department itself was under much confusion as to whether excise duty is to be collected or not on bright bars. - when the input is received in the factory and used in or in relation to manufacture of final product and payment of duty is evidenced by the invoices the credit cannot be denied. The question whether the input is a result of a process of manufacture is irrelevant - Decided in favour of assessee.

Summary

Issues:
Challenge to disallowance of Cenvat credit on bright bars used as inputs.

Analysis:
1. The appeal challenged the disallowance of Cenvat credit on bright bars used as inputs. The issue arose as the Hon'ble Supreme Court held that no process of manufacture was involved in transforming bright bars from round bars, making them non-excisable. The show cause notice disallowed the credit, leading to duty demand, interest, and penalty. The Commissioner (Appeals) upheld this decision, prompting the appellant to approach the Tribunal for redress.

2. The core question revolved around whether the appellant could claim credit on duty paid for bright bars used in manufacturing finished goods. The Department argued that since no excise duty was payable on bright bars due to the absence of a manufacturing process, the appellant was not entitled to credit. However, the appellant did pay duty on the bright bars received and used them in their final product, with valid documentation under the Cenvat Credit Rules. The denial of credit was based on the supplier's end not treating these goods as excisable, despite conflicting interpretations by the Department over time.

3. Notably, while a Supreme Court judgment stated that transforming round bars into bright bars did not constitute manufacture, a subsequent trade notice initially clarified that making bright bars from wire rods did amount to manufacture. However, a later notice contradicted this, leading to confusion within the Department. The Commissioner (Appeals) acknowledged the contentious nature of the issue, issuing protective demands until clarity was achieved. The delayed adjudication highlighted the Department's uncertainty regarding the excisability of bright bars.

4. In a related case, the Tribunal ruled that if duty was paid on inputs received and used in manufacturing, credit could not be denied, irrespective of whether the input underwent a manufacturing process. The key criterion was the payment of duty on the input, as evidenced by invoices. This decision emphasized the importance of duty payment over the manufacturing process in determining credit eligibility.

5. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any necessary consequential reliefs. The judgment underscored the significance of duty payment on inputs for claiming credit, irrespective of the manufacturing process involved.