2017 (6) TMI 96 - AT - Central Excise

CENVAT credit - inputs - denial on the ground that the process undertaken by the appellant does not amount to manufacture - Held that - It is an admitted fact on record that the Registration Certificate surrendered by the appellant on 14.06.2005 was restored by the Department, stating that the processes undertaken by the appellant amount to manufacture. The Department itself has recognized the processes undertaken by the appellant, as amounting to manufacture, and consequently the central excise duty paid by the appellant, was retained as the Government Revenue. As such, cenvat credit taken on the inputs, input services and capital goods, cannot be denied on the ground that those goods and services were used for manufacture of non-dutiable goods, on which duty liability has been discharged from cenvat credit account. Appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of cenvat credit on inputs used in the manufacture of finished goods cleared on payment of duty.

Analysis:
1. The dispute in this case revolves around the denial of cenvat credit on inputs used in the manufacture of finished goods cleared on payment of duty. The appellant, a manufacturer of printed/laminated/metallised flexible plastic film, faced an issue where the Department sought recovery of cenvat credit taken on inputs, input services, and capital goods, arguing that the process undertaken by the appellant did not amount to manufacture.

2. The appellant's activities were initially deemed non-manufacturing by the Hon'ble Supreme Court in a previous case. However, the Department later restored the appellant's registration certificate, recognizing that the processes undertaken by the appellant indeed amounted to manufacture. This acknowledgment was crucial as it resulted in the retention of central excise duty paid by the appellant as Government Revenue, indicating that the goods produced were dutiable. Consequently, the cenvat credit taken by the appellant on inputs, input services, and capital goods could not be denied based on the argument that they were used for the manufacture of non-dutiable goods.

3. The Tribunal referred to a previous case where it was held that once the duty on final products is accepted by the Department, cenvat credit need not be reversed, even if the activity does not strictly amount to manufacture. This principle was further supported by a decision of the Hon'ble Bombay High Court and the Hon'ble Gujarat High Court, emphasizing that if duty is levied on goods, modvat credit cannot be denied even if the activity does not meet the technical definition of manufacture. In this context, the Tribunal concluded that the cenvat credit taken by the appellant on disputed inputs, capital goods, and input services should not be denied since they were used in the manufacture of excisable goods cleared on payment of duty, which was accepted and retained by the Department as Government Revenue.

4. Ultimately, the Tribunal found no merit in the impugned order and set it aside, allowing the appeal in favor of the appellant. The decision was based on the recognition of the appellant's processes as manufacturing activities by the Department, leading to the conclusion that the denial of cenvat credit on inputs used in the manufacture of finished goods cleared on payment of duty was unjustified and not in accordance with the law.

5. In conclusion, the Tribunal's judgment in this case highlights the importance of consistent recognition of manufacturing activities by the relevant authorities and the implications it has on the eligibility for cenvat credit on inputs used in the production of dutiable goods.