2023 (9) TMI 408 - AT - Central Excise

Irregular availment of credit on MS plates - Process amounting to manufacture - processes undertaken by the appellant on MS plates - violation of Rule3(1) read with Rule 2(k) of the Cenvat Credit Rules 2004 - HELD THAT - It is a settled position in law that if Cenvat Credit is availed on goods (inputs) that are subjected to certain processes, that do not amount to manufacture, and if such goods are cleared on payment of excise duty, then there is no requirement for reversal of Cenvat Credit availed on the inputs. It is also the appellants contention that even if it is assumed that the processes undertaken viz cleaning, cutting and drilling of MS plates do not amount to manufacture, Cenvat Credit on the inputs is essentially available to them. The fact of clearance of such goods to their sister unit on payment of excise duty is evident from records - it is also noted that the amount of duty paid by the appellant is higher than the amount of credit availed. The Hon ble Bombay High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES 2012 (7) TMI 141 - BOMBAY HIGH COURT , had upheld the Tribunal order, wherein an identical contention in the context of decoiled HR/CR coils cut into specific size was concerned with and the Tribunal had upheld the availment of CENVAT credit on HR/CR coils and its utilization for payment of duty on decoiled HR/CR coils cleared. As the question of law as in the impugned appeal is no more res integra and has been settled, by the decision of the Hon ble Gujarat High Court, in the case of COMMISSIONER OF CENTRAL EX. CUS., SURAT-III VERSUS CREATIVE ENTERPRISES 2008 (7) TMI 311 - GUJARAT HIGH COURT , there can be no question of levy of duty and if duty is levied, the Cenvat Credit cannot be denied to the manufacturer. There is no merit in the adjudication order passed by the learned Commissioner and it being bereft of merit needs to be set aside - Impugned order set aside - appeal allowed.

Summary

Issues:
The issues involved in the judgment are the disallowance of Cenvat Credit on MS plates by the department, alleged irregularities in availing credit, imposition of penalty, demand for payment of interest, and the contention regarding processes not amounting to manufacture.

Disallowed Cenvat Credit on MS Plates:
The department alleged that the appellant, besides manufacturing excavator parts, undertook processes on MS plates that were not considered as manufacture under Section 2(f) of the Central Excise Act, 1944. The appellant was accused of irregularly availing credit on these MS plates, leading to a demand for payment under Section 11(A) of the Act. The notice also mentioned willful misstatement and suppression of facts by the appellant.

Contention and Adjudication:
In response, the appellant contended that they cleared the MS plates on an "as such basis" to their sister unit, making the exercise revenue neutral. They argued that there was no willful suppression of facts as they regularly filed their ER-1 returns. However, the Commissioner upheld the demand proposed in the Show Cause Notice, disallowing the Cenvat Credit availed and imposing penalties and interest. An amount was appropriated by the department as well.

Legal Precedents:
The Tribunal noted that if goods are cleared on payment of excise duty after undergoing processes that do not amount to manufacture, there is no need to reverse Cenvat Credit on the inputs. Citing the decisions of various High Courts, including Gujarat, Bombay, and Karnataka, the Tribunal emphasized that once duty is paid treating the processes as manufacturing activities, Cenvat credit cannot be denied. The Tribunal highlighted the settled legal position in this regard.

Decision:
Based on the legal precedents and the settled legal position, the Tribunal found no merit in the adjudication order passed by the Commissioner. The Tribunal set aside the impugned order and allowed the appeal filed by the appellants, concluding that there was no justification for the department's contentions.