2016 (7) TMI 1138 - AT - Central Excise

Cenvat credit eligibility - whether credit is eligible on inputs, when the process does not amount to manufacture? - manufacturing of High Carbon Ferro Chrome (HCFC) - Held that - Once assessee considered the activity as amounting to manufacture and discharged duty liability CENVAT Credit cannot be denied holding that there is no manufacture. See AJINKYA ENTERPRISES Versus COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2013 (6) TMI 610 - CESTAT MUMBAI . Thus in the present case we have no hesitation to hold that the credit is admissible

Summary

Issues Involved:
Manufacture of High Carbon Ferro Chrome (HCFC), denial of CENVAT credit on inputs, determination of manufacturing process, interpretation of Rule 2(k) of Cenvat Credit Rules (CCR), 2002.

Analysis:

1. Manufacturing Process and CENVAT Credit Denial:
The appellants were manufacturing High Carbon Ferro Chrome (HCFC) and availing CENVAT credit on inputs & capital goods. A dispute arose when the department alleged that no manufacturing process was involved as both the low grade HCFC input and high grade HCFC output fell under the same Chapter Heading 7202. A show cause notice was issued proposing the recovery of CENVAT credit availed on HCFC used as inputs. The original authority initially dropped the proceedings, but the Commissioner (Appeals) later held that no manufacturing process was involved and denied the credit based on Rule 2(k) of CCR, 2002.

2. Appellant's Argument and Precedents:
The appellant argued that they had cleared the final product by paying Central Excise duty, and therefore, the credit on inputs should not be denied solely on the ground that the activity did not amount to manufacture. The appellant cited several judgments, including Exide Industries Ltd. and Ajinkya Enterprises, to support their position that once duty on final products is accepted, credit cannot be denied based on the manufacturing process.

3. Department's Defense and Tribunal Decision:
The department contended that since both the input and final product fell under the same chapter heading, no new distinct product emerged, and hence, the process did not amount to manufacture. The Tribunal, however, referred to the decision in Commissioner Vs Ajinkya Enterprises, where it was held that once duty on final products is accepted, CENVAT credit need not be reversed even if the activity does not strictly amount to manufacture. Relying on this precedent and other supporting judgments, the Tribunal set aside the impugned order, allowing the appeal and granting consequential reliefs.

4. Conclusion:
The Tribunal's decision clarified that the eligibility of credit on inputs should not be solely determined by whether the activity amounts to manufacture, especially when duty on the final products has been accepted. The judgment emphasized the importance of following established precedents and legal principles in deciding such matters, ultimately ruling in favor of the appellant and granting the requested reliefs.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, relevant precedents cited, and the final decision rendered by the Tribunal.