2025 (3) TMI 1133 - AT - Central Excise

Process amounting to manufacure or not - activities of cutting / slitting of H.R. Coils etc. - applicability of C.B.E.C. Circular No. 811/08/2005-CX. dated 02.03.2005 - procedure laid down in Rule 3(4) (b) of the CENVAT Credit Rules 2004 followed or not - non-imposition of penalty under the provisions of Rule 15(1) of CENVAT Credit Rules 2004 - Extended period of limitation - suppression of facts or not. Process amounting to manufacture - HELD THAT - The Respondent are engaged in cutting/slitting of H.R.Coils and conversion of the same to M.S. Plates. The said process does not amount to manufacture. Since the process does not amount to manufacture the Respondent took recourse of Rule 16 of the Central Excise Rules 2002 i.e. they used to bring the H.R. Coils under Rule 16(1) of the said rules and availed CENVAT Credit in terms of the said rules. After the conversion i.e. cutting/slitting of the goods the resultant products i.e. M.S. Plates were removed by debiting an amount as prescribed under Rule 16(2) of the said rules. This procedure adopted by them was known to the Department as the said procedure was advised by the jurisdictional Assistant Commissioner. Extended period of limitation - suppression of facts or not - HELD THAT - There is no suppression of facts with intention to evade the duty established against the Respondent in this case. Hence the ld. adjudicating authority has rightly held that the extended period is not invocable in this case and dropped the demand raised in the notices by invoking extended period of limitation. Non-imposition of penalty under Rule 15(1) of the CENVAT Credit Rules 2004 - HELD THAT - In the instant case the Respondent has paid an amount equal to the credit taken while clearing the goods after processing. The Department has accepted the equal amount of credit paid by the Respondent under Rule 16(2) of the Central Excise Rules 2002. In a catena of decisions it has been held that though the process does not amount to manufacture credit on inputs cannot be denied as the manufacturer paid duty on the final products. The Respondent has rightly availed credit on the inputs and paid an amount equal to the credit taken at the time of clearance of the goods as provided under Rule 16(2) of the Central Excise Rules 2002. Thus we observe that the allegation of irregular availment of credit against the Respondent does not survive. Once the credit availed by the Respondent is found to be regular there is no irregularity in utilising the same to discharge the payment as per Rule 16(2) of the Central Excise Rules. Since the availment of credit and subsequent utilisation of the same for paying the amount as per Rule 16(2) of the Central Excise Rules, 2002 are found to be regular no penalty imposable on the Respondent. Consequently there are no infirmity in the impugned order passed by the Ld. adjudicating authority. Conclusion - The duty paid by the appellants has been accepted by the department which is admittedly more than the CENVAT credit availed by the appellants. The appellants are not required to reverse the credit. Appeal of Revenue dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

(i) Whether the Commissioner erred by partially dropping the demand for the period from November 1, 2005, to March 2010, in the first Show Cause Notice, given the respondent's non-compliance with the Assistant Commissioner's directive to follow Rule 3(4)(b) of the CENVAT Credit Rules, 2004.

(ii) Whether the Commissioner erred by not imposing a penalty under Rule 15(1) of the CENVAT Credit Rules, 2004, despite disallowing and ordering recovery of irregularly availed CENVAT credit.

ISSUE-WISE DETAILED ANALYSIS

Issue (i): Partial Dropping of Demand

Relevant legal framework and precedents: The relevant legal framework includes Rule 3(4)(b) of the CENVAT Credit Rules, 2004, and the Central Excise Rules, 2002. The Department referenced C.B.E.C. Circular No. 811/08/2005-CX. and precedent from the High Court of Delhi and the Supreme Court regarding the non-manufacture status of cutting/slitting activities.

Court's interpretation and reasoning: The Tribunal found that the procedure adopted by the respondent under Rule 16 of the Central Excise Rules, 2002, was known and advised by the jurisdictional Assistant Commissioner. The Department was aware of the respondent's actions, and there was no suppression of facts with the intent to evade duty.

Application of law to facts: The Tribunal held that since the Department was aware and had advised the procedure, there was no suppression of facts. Consequently, the extended period of limitation was not applicable, and the partial dropping of demand by the Commissioner was justified.

Conclusions: The Tribunal upheld the Commissioner's decision to drop the demand for the period from November 1, 2005, to March 2010, rejecting the Revenue's appeal on this ground.

Issue (ii): Non-imposition of Penalty

Relevant legal framework and precedents: The legal framework includes Rule 15(1) of the CENVAT Credit Rules, 2004, which mandates penalties for wrongful availing of CENVAT credit. The Tribunal referenced case law supporting the non-requirement of credit reversal if duty paid on final products is accepted.

Court's interpretation and reasoning: The Tribunal observed that the respondent paid an amount equal to the credit taken while clearing the goods, which the Department accepted. The Tribunal noted that judicial pronouncements have upheld that credit on inputs cannot be denied if duty on final products is paid.

Key evidence and findings: The Tribunal considered the respondent's compliance with Rule 16(2) of the Central Excise Rules, 2002, and the acceptance of duty paid by the Department. The Tribunal also referenced multiple case laws where similar practices were upheld.

Application of law to facts: The Tribunal applied the principle that once duty on final products is accepted, credit availed cannot be deemed irregular. Consequently, no penalty under Rule 15(1) was warranted.

Conclusions: The Tribunal found no irregularity in the respondent's actions and upheld the Commissioner's decision not to impose a penalty, rejecting the Revenue's appeal on this ground.

SIGNIFICANT HOLDINGS

The Tribunal's significant holdings include:

- The Tribunal upheld the Commissioner's decision, finding no suppression of facts and thus, no justification for invoking the extended period of limitation.

- The Tribunal held that the respondent's availing and utilization of CENVAT credit were regular, as duty paid on the final products was accepted by the Department.

- The Tribunal concluded that no penalty was imposable under Rule 15(1) of the CENVAT Credit Rules, 2004, as the credit availed was not irregular.

Verbatim quote: "Therefore in view of the above discussion, we find that the duty paid by the appellants has been accepted by the department which is admittedly more than the CENVAT credit availed by the appellants. Therefore, following the various judicial pronouncements as discussed herein above, we hold that the appellants are not required to reverse the credit."

The Tribunal's final determination was to uphold the Commissioner's order and reject the Revenue's appeal, confirming that the respondent's practices were in compliance with the applicable rules and regulations.