2016 (6) TMI 470 - AT - Central Excise

Cenvat Crediti - processing on the barrels to convert into final product, by fixing of injection moulded caps, inners, etc was not amount to manufacture - reversal of credit - Held that - The appeals can be disposed of on legal grounds that credit having been utilized by the appellant for payment of duty for their final product and thus not require any further reversal. It has been the subject matter of various decisions that once the duty of Excise is paid by utilizing the credit availed by an assessee, the same would amount to reversal of credit and there can be no requirement of any further reversal. Reference in this regard can be made to a latest decision of the Tribunal in the case of Asian Colour Coated Ispat Ltd. Vs. Commissioner of C. Excise., Delhi-III 2014 (9) TMI 974 - CESTAT NEW DELHI where there was difference of opinion between two original Members of the Bench and the issue was resolved by a third Member. After discussing the entire case laws, it was held that the credit availed on the inputs which were allegedly used for payment of duty on the final product, which cannot be held to be a manufactured product, would not call for further reversal. Inasmuch as we hold in favour of the assessee on the main issue, and the issue of reversal of credit on account of non-receipt of inputs sent to the job worker within a period of 180 days is a procedural lapse and inasmuch as the credit has been reversed along with interest even before the issue of show-cause notice, we find no justifiable reason to impose penalty on the appellant and also on the Managing Director. The penalty is accordingly set aside

Summary

Issues:
- Entitlement to avail Cenvat credit of Excise duty paid by principal manufacturer.
- Whether the process undertaken by the appellant amounts to manufacture.
- Imposition of penalty on the appellant and Managing Director.

Entitlement to avail Cenvat credit of Excise duty paid by principal manufacturer:
The case involved the appellant getting job-work for the principal manufacturer and manufacturing containers/barrels from granules received from the principal manufacturer. The barrels were cleared to the principal manufacturer on job-work bills, who then sold them back to the appellant after paying Excise duty. The appellant further processed the barrels into final products by adding components like injection-molded caps and inners, availing credit of Excise duty paid by the principal manufacturer for clearing the final products. The Revenue objected, claiming that the process carried out by the appellant did not amount to manufacture, thus challenging the appellant's entitlement to avail Cenvat credit. However, the tribunal held that once the duty of Excise was paid by utilizing the credit availed, it amounted to reversal of credit, citing a precedent where it was established that credit availed for payment of duty on the final product did not require further reversal. Consequently, the tribunal ruled in favor of the appellant on this issue.

Whether the process undertaken by the appellant amounts to manufacture:
The appellant contended that the process they undertook on the barrels constituted manufacturing and cited various tribunal decisions to support their claim. However, the tribunal determined that the appeals could be resolved on legal grounds without delving into the manufacturing aspect. The tribunal emphasized that the credit availed by the appellant had been utilized for paying duty on the final product, eliminating the need for further credit reversal. Referring to a specific case where a similar issue was resolved, the tribunal concluded that the credit availed on inputs used for paying duty on a final product that could not be considered manufactured did not necessitate additional credit reversal. Therefore, the tribunal did not delve into whether the process undertaken by the appellant amounted to manufacturing, as the legal grounds were sufficient to decide the case.

Imposition of penalty on the appellant and Managing Director:
Regarding the issue of reversing credit due to non-receipt of inputs sent to another job worker within 180 days, the appellant had already reversed the credit with interest before the show-cause notice was issued. The tribunal considered this a procedural lapse and found no justifiable reason to impose a penalty on the appellant or the Managing Director. Consequently, the penalty was set aside for both parties, and the appeals were decided in favor of the appellant on the main issue, with the procedural lapse not warranting a penalty imposition.