2020 (11) TMI 1117 - AT - Central Excise

Wrongful availment of CENVAT credit between 15th December 2007 and 31st January 2009 - proceedings initiated for recovery of credit on the ground that the activities undertaken on the combi pack by the appellant did not amount to manufacture - HELD THAT - The Hon ble High Court of Karnataka in re Vishal Precision Steel Tubes Strips Pvt Ltd 2017 (3) TMI 1287 - KARNATAKA HIGH COURT has held that ' When once duty is paid by the assessee treating the activity as manufacturing activity by the Department, Cenvat credit is available and there is no question of reversion of Cenvat credit.' The impugned order is not consistent with law and must be set aside - Appeal allowed.

Summary

Issues: Confirmation of demand under section 11A of Central Excise Act, 1944 for allegedly wrongly availed CENVAT credit, imposition of penalty under rule 15 of Central Excise Rules, 2004, determination of whether activities undertaken by the appellant on the 'combi pack' amount to manufacture, eligibility for CENVAT credit under rule 3 of CENVAT Credit Rules, 2004, and the impact of previous judicial decisions on the case.

The appeal in this case was against the confirmation of demand of Rs 3,20,73,442/- for allegedly wrongly availed CENVAT credit and the imposition of a penalty under rule 15 of Central Excise Rules, 2004. The appellant, a manufacturer of 'mosquito mats', 'liquidator refills', and 'powerlite combi pack', had entered into an agreement with another company for packing 'refills' with 'mosquito repellent machines'. The appellant was availing CENVAT credit on the supplies made by them, which were then cleared on payment of duty after certain processes. The issue arose when it was questioned whether the activities undertaken by the appellant on the 'combi pack' amounted to manufacture.

According to the Learned Counsel for the appellant, various judicial decisions supported the appellant's position that denial of credit availed under CENVAT Credit Rules, 2004 should not occur when duty paid by a manufacturer supplying goods to another registered manufacturer is accepted. The Counsel cited decisions from the Hon'ble High Courts of Madras and Karnataka, as well as a decision from the Hon'ble Supreme Court. It was argued that the entire exercise should be considered revenue neutral, as per a decision by the Tribunal in a previous case.

The Authorized Representative contested these assertions, emphasizing that CENVAT credit eligibility is limited to inputs/input services used in the manufacture of excisable goods. The Representative also highlighted the detailed findings in the impugned order regarding the claim of limitation bar, supporting the recovery of duty.

The judgment referred to a decision by the Hon'ble High Court of Karnataka, which held that once duty is paid and the final product is treated as dutiable, CENVAT credit is available without any reversion. This decision relied on earlier judgments from the High Courts of Gujarat and Bombay. Based on this precedent, the impugned order was deemed inconsistent with the law and was set aside, resulting in the appeal being allowed.