2019 (5) TMI 1788 - AT - Central Excise

Process amounting to manufacture or not - Lamination - cenvat credit paid on inputs going into manufacture of laminated printed rolls - Sub Rule (3) of Rule 6 of Cenvat Credit Rules 2004 - HELD THAT - During the relevant period appellant treated lamination as manufacture and availed cenvat credit on bare films and paid central excise duty on laminated rolls and cleared the same along with other manufactured goods. It is clear that the cenvat credit availed by the appellant was debited for payment of central excise duty on laminated rolls. CENVAT credit paid on inputs going into manufacture of laminated printed rolls - Applicability of Sub Rule (3) of Rule 6 of Cenvat Credit Rules 2004 - HELD THAT - The said rule provides for recovery of amount in respect of such goods which are cleared without payment of duty. It is undisputed fact that laminated rolls were cleared on payment of duty therefore the impugned order is not sustainable in respect of the said amount of around 1.25 crore - Since the recovery of the said amount of around 1.25 crore is not sustainable the interest and equal penalty on the same is also not recoverable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Recovery of cenvat credit on bare films used in the manufacture of laminated rolls.
2. Recovery of a specific percentage of the value of laminated films cleared.
3. Imposition of penalty on the appellant.

Analysis:

Issue 1: Recovery of Cenvat Credit on Bare Films
The case involved the appellant, a manufacturer of 'Biscuits, Printed Laminated Rolls, and Corrugated Boxes,' facing proceedings for the recovery of cenvat credit availed on bare films used in the manufacture of laminated rolls. The Original Authority confirmed the disallowance of cenvat credit and ordered recovery of a significant amount along with interest and penalty. However, the Tribunal noted that during the relevant period, the appellant treated lamination as manufacture, availed cenvat credit on bare films, and paid central excise duty on laminated rolls. Referring to precedents like the case of Asian Colour Coated Ispat Ltd., the Tribunal held that when cenvat credit is utilized for payment of central excise duty on goods not attracting excise duty, the credit cannot be recovered. Following this reasoning, the Tribunal found the demand for recovery of cenvat credit on bare films unsustainable and set aside the order.

Issue 2: Recovery of a Specific Percentage of the Value of Laminated Films Cleared
Another aspect of the case involved the confirmation of an amount under Sub Rule (3) of Rule 6 of Cenvat Credit Rules 2004 for goods cleared without payment of duty. The Tribunal observed that the laminated rolls were cleared on payment of duty, making the recovery of the specified amount unsustainable. Citing the decision in the case of M/s Montage Enterprises Pvt. Ltd., the Tribunal concluded that the recovery of the amount was not justified, leading to the inapplicability of interest and penalty associated with it. Consequently, the Tribunal set aside the order in this regard as well.

Issue 3: Imposition of Penalty
Lastly, the Tribunal addressed the imposition of a penalty of around ?2.61 crore on the appellant by the Original Authority. Given the findings on the first two issues, where the demands for recovery were deemed unsustainable, the Tribunal allowed the appeal and provided consequential relief to the appellant. By setting aside the impugned order, the Tribunal relieved the appellant from the penalty imposed, thereby concluding the case in favor of the appellant.

In conclusion, the Tribunal's detailed analysis and application of legal principles from relevant precedents led to the setting aside of the impugned order, providing relief to the appellant on all contested issues.