2024 (9) TMI 311 - AT - Central Excise

Process amounting to manufacture or not - SCN and Order-in-Original without alleging and proving manufacture, devoting efforts and giving finding in respect of classification, is perverse particularly when such a contention is admittedly raised by the appellants in their reply to notice - burden to prove of manufacture not been discharged by the Revenue - cum duty benefit. Whether a different goods emerged after carrying out the said activity? - HELD THAT - The SCN and the impugned Order-In-Original is in this regard is vague and confirmation of demand based on assumption and presumption and without adjudicating on above aspect is perverse and not tenable. Since, the root cause of this case is demand of Excuse duty assuming that the activity under taken by the appellant are manufacture, however, the adjudicating authority has not properly examined the overall activity of the appellant, process and whether a different goods emerged after carrying out the said activity. Therefore, without proper examination of the process and the emergence of distinct commodity the demand of Excise duty considering the activities as manufacture cannot be sustainable. Therefore, on the aspects of manufacture the matter needs to be re-examined by adjudicating authority. CENVAT Credit - denial on the ground that the invoices on which the Cenvat credit was claimed bear endorsement - HELD THAT - In many cases it has been decided that merely because the invoices are endorsed Cenvat credit cannot be denied, when the duty payment and receipt of raw material and use in the manufacture is established. These aspects are not under dispute in the present case except the charge that the invoices are endorsed. Therefore, the appellant are entitled for the Cenvat credit subject to verification of the document - the denial of Cenvat credit merely on the ground that the invoices are endorsed is not sustainable. Cum duty benefit - adjudicating authority has denied this benefit on the ground that the appellant had a mala fide intention - HELD THAT - This contention of the adjudicating authority cannot be agreed upon for the reason that statutory provision under the Act cannot be flouted on the ground that the assessee has mala fide intention or bona fide intention. Even if it is established that the assessee has a mala fide intention, the statutory provision cannot be kept aside and matter cannot be decided on the whims of the authority. For example while confirming the demand, if it is established the assessee is eligible for SSI exemption or any beneficial notification, irrespective whether there is mala fide intention the said benefits provided in the statute cannot ignored. Therefore, merely on the contention that the appellant had a mala fide intention cum duty benefit cannot be denied - the appellant is eligible for cum duty benefit. The appeals are allowed by way of remand to the adjudicating authority.

Summary

Issues:
1. Classification of goods and liability under Central Excise Act.
2. Denial of Cenvat credit.
3. Allegation of mala fide intention by the appellant.
4. Clubbing of clearances of different trading concerns.

Classification of Goods and Liability under Central Excise Act:
The appellants filed appeals against the Order-in-Original confirming duty demands and penalties under Section 11AC and Rule 26 of the Central Excise Act. The issue revolved around whether the appellants were engaged in the manufacture of boxes or merely trading duplex paper board. The department argued that the appellants were manufacturing boxes and thus liable for duty under the Central Excise Tariff Act. The Adjudicating Authority confirmed the demand and penalties, leading to the filing of appeals by the appellants.

Denial of Cenvat Credit:
The appellants contended that the authorities did not ascertain whether the activity undertaken by them constituted manufacturing before demanding duty. They argued that Cenvat credit should not have been denied based on endorsed invoices, as the duty payment and use of raw materials were established. The appellants also claimed that the cum duty benefit was not extended due to alleged mala fide intention, which they disputed. They cited various judgments to support their arguments, emphasizing the importance of proper examination before confirming duty demands.

Allegation of Mala Fide Intention:
The Revenue reiterated the findings of the impugned order, alleging that the appellants had a mala fide intention by misdeclaring goods as sheets when they were actually ready-to-use duplex boxes. The Revenue argued that the demand for an extended period was justified due to the appellants' attempt to mislead the department. The appellants challenged these allegations, emphasizing the need for proper examination and classification of goods before confirming duty demands.

Clubbing of Clearances of Different Trading Concerns:
The appellants argued against the clubbing of clearances from three independent trading concerns, stating that each entity operated separately without mutual interest. They presented various judgments to support their stance, highlighting the independence of each trading concern. The appellants emphasized the need for a detailed examination of each entity's activities before attributing liability under the Central Excise Act.

In the judgment, the Tribunal found that the Order-In-Original failed to address crucial aspects related to the classification of goods and manufacturing activity. It noted that the demand of Excise duty assuming manufacturing activities without proper examination was not sustainable. The Tribunal also ruled in favor of the appellants regarding the denial of Cenvat credit, stating that the denial based on endorsed invoices was not justified. Additionally, the Tribunal disagreed with the denial of cum duty benefit due to alleged mala fide intention, emphasizing the importance of adhering to statutory provisions. The impugned orders were set aside, and the appeals were allowed for a fresh adjudication by the adjudicating authority within a specified timeframe.