2016 (12) TMI 835 - AT - Central Excise

Reversal of CENVAT credit - packing and clearing the goods received from own unit situated separately after adding 15% overhead on the value - instrument panel, extension chamber, cubical transducer, junction box etc - the goods were treated as inputs by assessee and CENVAT credit was availed on the same - Whether the packing of said inputs would amount to manufacture? - the goods were cleared on payment of duty, is the reversal of credit now demanded is justified? Held that - even though the activity undertaken by the appellant after receipt of the goods was only mere packing, it is not disputed that the goods have been cleared from the appellants factory on payment of duty. It is also not in dispute that the duty paid at the time of clearance is more than the cenvat credit taken. Further, it was the finding of the Commissioner that when the process is held to be not manufacture, then the duty paid on the final product should be treated as reversal of the ineligible credit on the inputs and the assessee cannot be called upon to pay the credit. Thus I find that when credit is proposed to be denied by holding that the process in which goods on which credit has been taken were used, did not amount to manufacture, duty paid by the assessee by utilising the credit on such goods is to be treated as reversed/ paid back. I find the issue is issue is Revenue neutral. Appeal dismissed - reversal of credit not required - decided against Revenue.

Summary

Issues:
1. Admissibility of cenvat credit on goods received and cleared after adding overhead.
2. Whether mere packing of goods constitutes manufacture for Central Excise duty payment.
3. Interpretation of duty payment and utilization of cenvat credit.
4. Application of relevant case law in determining admissibility of cenvat credit.

Analysis:
1. The appeal addressed the admissibility of cenvat credit by the appellant, a manufacturer of Electronic Process Control Equipment, on goods received from their unit and cleared after adding overhead. The Revenue contended that the added overhead did not constitute manufacture for Central Excise duty payment, challenging the admissibility of cenvat credit.

2. The Commissioner, in the impugned order, dropped the demands raised by the Revenue, emphasizing that although the activity post-receipt was mere packing, the goods were cleared from the factory after duty payment. The Commissioner found that the duty paid exceeded the cenvat credit utilized, and the appellant did not misuse the credit for personal benefit, thus deeming the duty payment as a reversal of credit.

3. The Commissioner's decision was supported by the Gujarat High Court's ruling in a similar case, where it was established that if the process does not amount to manufacture, the duty paid on the final product should be considered a reversal of ineligible credit on inputs. Therefore, the duty payment utilizing the credit on goods not considered manufactured was treated as reversed or paid back, maintaining revenue neutrality.

4. The Appellate Tribunal upheld the Commissioner's findings, citing alignment with the case law relied upon by the Respondent. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision not to demand the cenvat credit already debited at the time of clearance. The judgment emphasized the revenue-neutral approach in cases where the process does not amount to manufacture, ensuring proper utilization of cenvat credit and duty payment compliance.