2020 (4) TMI 194 - AT - Central Excise

CENVAT credit on inputs and input services used in manufacture - Activity amounted to manufacture - roof bolts and W straps prepared and cleared by the respondents for use in mines - Valuation - price variation clause - HELD THAT - dispute whether the activity undertaken by the appellant amounts to manufacture or not the same has been settled by this Tribunal vide an order 2010 (2) TMI 395 - CESTAT, BANGALORE The activity undertaken by the appellant amounts to manufacture, therefore, in terms of Rule 3 of CENVAT Credit Rules 2004, the appellant is entitled to take CENVAT credit on inputs and input services used in manufacturing of the said excisable goods. Admittedly, the said benefit has not been granted by the adjudicating authority - Further, the appellant has been able to produce the tender document as well as their purchase agreement show that on escalation of prices of raw material, the price of finished goods is to be revised and duty is to be paid on higher price. In case the price of raw material falls, the appellant is entitled to claim less amount of the manufactured goods. Therefore, as per the said clause, as per price variation clause, the duty needs to be recalculated as per the amount received from the buyer towards supply of goods by the appellant. The same is required to be examined by the adjudicating authority. The matter is sent back to the adjudicating authority to calculate the demand after allowing CENVAT credit available to the appellant on inputs and input services used in the manufacture of the goods cleared by them and in terms of price variation clause - Penalty is not imposable - appeal allowed by way of remand.

Summary

Issues:
1. Whether the activity undertaken by the appellant amounts to manufacture under Section 2(f) of the Central Excise Act 1944.
2. Entitlement of the appellant to take CENVAT credit on inputs and input services used in manufacturing.
3. Calculation of correct demand of duty considering the price variation clause.
4. Imposition of penalties on the appellant.
5. Liability for interest payment by the appellant.

Analysis:

Issue 1:
The appellant appealed against an order confirming duty demand, asserting that the activity undertaken by them constitutes manufacture. The appellant manufactures various equipment used in mines. The dispute centered on whether their activities amount to manufacture. Show-cause notices were issued for the period January 2006 to November 2009, leading to a finding that the appellant's activities indeed constitute manufacture.

Issue 2:
The appellant contended that since their activity amounts to manufacture, they are entitled to take CENVAT credit on inputs and input services used in manufacturing. The appellant argued for the application of a price variation clause in their agreements, allowing for adjustments in the duty calculation based on fluctuations in raw material prices.

Issue 3:
The Tribunal found that the appellant is entitled to CENVAT credit on inputs and input services used in manufacturing. The price variation clause in the agreements was considered, indicating that duty should be recalculated based on actual prices received for the goods supplied. The matter was remanded to the adjudicating authority for correct calculation of duty demand, including the benefit of cum-duty price.

Issue 4:
No penalty was imposed on the appellant, as the Tribunal had previously settled the dispute regarding whether the appellant's activities amount to manufacture. Therefore, it was held that no penalty is imposable on the appellant.

Issue 5:
The adjudicating authority was directed to calculate the actual duty payable by the appellant, considering the adjustments discussed. The appellant was required to pay any outstanding amount along with interest within 30 days of receiving the adjudication order.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and remanding the matter for recalculating the duty demand in accordance with the CENVAT credit rules and the price variation clause. No penalties were imposed, and the appellant was directed to pay any determined amount along with interest within the specified timeframe.