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2017 (9) TMI 68 - AT - Central Excise100% EOU - CENVAT credit - manufacture - activities of Segregation of Shredded mixed metal - case of Revenue is that the process of segregation of scrap not treated as manufacturing activity specified under Section 2 (f) of CEA, 1944 and as such the appellant is not entitled for the Cenvat Credit under rule 6(1) CCR 2004 - Held that - it is not under dispute that segregation of scrap was sold on payment of duty in the domestic market. Once the excise duty has been paid on the final product and same is not under dispute Cenvat credit on the input stage cannot be denied. For this reason itself, appellant is entitle for the CENVAT credit - it is not disputed that appellant have cleared the goods on payment of duty therefore, in terms of Rule 16 also appellant is entitle for the CENVAT credit - Appeal allowed - decided in favor of appellant.
Issues:
1. Entitlement to Cenvat Credit for segregation of shredded mixed metal. 2. Interpretation of manufacturing activity under Section 2(f) of Central Excise Act. 3. Admissibility of Cenvat Credit for non-manufacturers. 4. Application of Rule 5 and Rule 16 of Cenvat Credit Rules. Analysis: Issue 1: Entitlement to Cenvat Credit for segregation of shredded mixed metal The appellant, a 100% EOU, was involved in the segregation of shredded mixed metal falling under various Chapters. The dispute arose regarding whether the process of segregation of scrap qualified as a manufacturing activity under Section 2(f) of the Central Excise Act, 1944, and thus entitled the appellant to Cenvat Credit under rule 6(1) of the Cenvat Credit Rules, 2004. The adjudicating authority confirmed a demand against the appellant, which led to an appeal before the Commissioner(Appeals) and subsequently to the present appeal before the Tribunal. Issue 2: Interpretation of manufacturing activity under Section 2(f) of Central Excise Act The appellant argued that since they had legally cleared the goods by paying duty, the segregation of scrap should not be considered exempted goods. They contended that the lower authorities failed to consider Rule 5 of the Cenvat Credit Rules, which allows for the refund of unutilized credit on export goods. The appellant asserted that the concept of manufacture for a 100% EOU is broader than that under Section 2(f) of the Central Excise Act. They cited various judgments to support their argument. Issue 3: Admissibility of Cenvat Credit for non-manufacturers The Revenue, represented by the Superintendent, argued that segregation of scrap does not amount to manufacturing activity as per Section 2(f) of the Central Excise Act. They contended that Cenvat Credit is admissible to manufacturers, and since the appellant was a non-manufacturer, they were not entitled to the credit. Issue 4: Application of Rule 5 and Rule 16 of Cenvat Credit Rules The Tribunal, after considering the submissions from both sides, found that the denial of Cenvat Credit by the lower authorities was based on the premise that segregation of scrap did not amount to manufacture. However, since the scrap was sold after payment of duty in the domestic market, and the duty payment on the final product was not disputed, the Tribunal held that the appellant was entitled to the Cenvat Credit. The Tribunal also invoked Rule 16 of the Central Excise Rules, 2002, to support their decision, emphasizing that even if an activity does not amount to manufacture, the assessee is entitled to take credit on the input. The Tribunal set aside the impugned order and allowed the appeal in favor of the appellant. This judgment clarifies the entitlement to Cenvat Credit for activities like segregation of scrap and emphasizes the application of relevant rules and legal provisions in determining the admissibility of such credits for EOUs and non-manufacturers.
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