2008 (1) TMI 154 - AT - Central Excise

Revenue contends that their registration has been cancelled therefore, they are not eligible for credit - It is also contended that the process of splitting & cutting of paper doesn t amounts to manufacture therefore, the appellants paying duty & availing credit is not as per law held that registration granted has been restored by Tribunal moreover issue with regard to impugned processes amounting to manufacture or not is a settled issue in favor of assessee hence credit was justified

Summary

Issues:
1. Registration status of the appellant as a manufacturer.
2. Eligibility of the appellant to avail Modvat credit.
3. Validity of the demands for deregistering the appellant and repayment of Modvat/Cenvat credit.
4. Proposals for charging interest, imposing penalties, and confiscation of goods.
5. Cancellation of registration and eligibility for Cenvat credit.
6. Whether the processes carried out by the appellant amount to manufacture.

Analysis:

Issue 1: Registration status of the appellant as a manufacturer
The case involved a dispute regarding the registration status of the appellant as a manufacturer. The appellant, a paper mill, had set up a unit for cutting and packing paper reels using contract laborers. The department had issued registration under Rule 174 in 1999 after a legal battle. Subsequently, the department tried to withdraw the registration based on the argument that the cutting and slitting operations were outsourced to job workers. The Tribunal, in various judgments, held that such operations did not result in an exigible product, and the appellant was entitled to retain the registration as a manufacturer. The Tribunal found that the appellant was the real manufacturer, controlling the unit and retaining the registration for sales tax benefits.

Issue 2: Eligibility of the appellant to avail Modvat credit
The Tribunal determined that the appellant, being treated as a manufacturer, was entitled to avail Modvat credit on duty paid paper reels. The appellant could discharge duty liability on reams using the Modvat credit. The demands to deregister the appellant and repay Modvat/Cenvat credit were held to be not sustainable, and the Cess paid by the appellant was deemed lawful.

Issue 3: Validity of demands and proposals
The Tribunal rejected the demands for deregistration and repayment of Modvat/Cenvat credit, concluding that the appellant was the manufacturer. Consequently, proposals for charging interest, penalties, and confiscation of goods were also dismissed as not sustainable.

Issue 4: Cancellation of registration and eligibility for Cenvat credit
The revenue contended that the appellant's registration had been canceled, making them ineligible for Cenvat credit. However, the Tribunal found that the registration granted was restored and upheld the appellant's right to avail Modvat credit based on the duty paid on paper reels.

Issue 5: Whether the processes amount to manufacture
The Tribunal addressed the argument that the processes carried out by the appellant did not amount to manufacture. It noted that the Commissioner had followed judgments in the appellant's favor, allowing them to pay duty and avail Cenvat credit on the reels. The Tribunal found no serious infirmity in the Commissioner's order and dismissed the appeal.

In conclusion, the Tribunal upheld the appellant's registration as a manufacturer, their eligibility to avail Modvat credit, and rejected the demands for deregistration and repayment of credit. The Tribunal also dismissed proposals for penalties and confiscation of goods, affirming the legality of the appellant's actions in paying duty and availing credit.