2016 (1) TMI 879 - AT - Central Excise

Utilized ineligible credit for the payment of final product - whether or not the process undertaken by the appellant amounts to manufacture for central excise purpose - Held that - The original authority has erred in not analyzing all the relevant facts involved in the present case. As such we find that the assessee has followed the cenvat credit scheme as applicable to them in the manufacture of their final products. The demand is not sustainable on this ground. We also find much force in the appellant s contention regarding unsustainability of demand to recover the input credit as the said credit has been utilized by them for payment of duty on the final product. Even in case the process is not amounting to manufacture as the input credit stands reversed during the course of payment of duty on final products no further demand for such reversed credit is sustainable. - Decided in favour of assessee.

Summary

Issues:
1. Whether the process undertaken by the appellant amounts to manufacture for central excise purposes.
2. Whether the utilized ineligible credit for the payment of final product can be subjected to recovery again.

Analysis:
1. The appellant, engaged in manufacturing flexible laminated film, availed cenvat credit on raw materials and used it for duty payment on final products. The Revenue contended that the process undertaken does not constitute manufacture, leading to a demand for credit recovery and penalties. The appellant argued that their process involves multiple steps resulting in a distinct final product, citing relevant case laws and Tribunal decisions to support their claim. The Original Authority relied on a Supreme Court judgment to deny the manufacturing status. However, the Tribunal found that the appellant's process, involving printing and lamination with different films, creates products with unique commercial identity and utility, distinct from input materials. Citing precedents, the Tribunal concluded that the appellant's process qualifies as manufacturing under the Central Excise Act, rejecting the Revenue's demand.

2. The appellant also contended that even if their process is not considered manufacturing, they have paid duty on final products exceeding the credit taken on inputs, rendering any recovery of reversed credit unsustainable. The Tribunal agreed, referencing various Tribunal and court decisions supporting the principle that once input credit is utilized for duty payment, no further recovery is warranted. Based on these arguments and findings, the Tribunal set aside the Revenue's order, allowing the appeal and rejecting the demand for credit recovery.