2006 (3) TMI 42 - AT - Central Excise

Central Excise Assessee ER-1 return showed the details of duty paid on final goods as well as details of Cenvat credit availed and utilized Department could not have asked party to reverse any part of credit taken during period of dispute

Summary

Issues:
1. Recognition of process as "manufacture"
2. Disallowance of Cenvat credit
3. Utilization of input duty credit

Recognition of process as "manufacture":
The appellants were involved in manufacturing bright steel bars from black steel bars/rods/coils, but the process was not recognized as "manufacture" during the material period. They cleared their products by paying duty and utilized Cenvat credit for such payments. A show-cause notice was issued proposing to disallow the credit taken, amounting to over Rs. 16 lakhs. The original authority disallowed the entire credit. The appellate Commissioner found that a portion of the credit had been utilized for duty payment on final products, while the balance remained unutilized. The lower appellate authority did not disturb the utilization of the input duty credit but asked the party to expunge the unutilized credit. The assessee appealed against this part of the Commissioner's order.

Disallowance of Cenvat credit:
Upon examination of records and hearing both sides, it was found that the assessee regularly filed Returns showing duty payments on final products and details of Cenvat credit availed and utilized. The department accepted the duty payments but did not object to the availing and utilization of Cenvat credit. The department's acceptance of the Returns, which included details of Cenvat credit, led to a situation where they could not ask the party to reverse any part of the credit taken during the disputed period. Therefore, the appellate Commissioner's direction to reverse a portion of the credit could not be sustained. The order was set aside in this regard, and the appeal was allowed with consequential relief.

Utilization of input duty credit:
The appellate Tribunal found that the department's approval of the assessee's Returns, which detailed the availed and utilized Cenvat credit, prevented them from asking the party to reverse any part of the credit taken during the disputed period. Consequently, the direction to reverse the unutilized credit was deemed unsustainable, leading to the setting aside of the order in that respect. The appeal was allowed with consequential relief.

(Order dictated and pronounced in open Court)