Cenvat credit cannot be denied by holding that the activity is not 'manufacture', when the Department had accepted the Excise duty liability on final products

[Bimal jain]

Dear Professional Colleague,

Cenvat credit cannot be denied by holding that the activity is not 'manufacture', when the Department had accepted the Excise duty liability on final products

We are sharing with you an important judgment of Hon’ble CESTAT, Mumbai, in the case of Foam Techniques MFG (I) Pvt. Ltd. Vs. CCE, THANE-I [2015 (1) TMI 1101 - CESTAT MUMBAI] on the following issue:

Issue:

Whether the Cenvat credit can be denied by holding that the activity is not 'manufacture', when the Department had accepted the Excise duty liability on final products?

Facts and background:

Foam Techniques MFG (I) Pvt. Ltd.(“the Appellant”) was engaged in the business of manufacture of P.U. foam sheets and availing the benefit of Cenvat credit. The Appellant had procured blocks of P.U. foam covered under Chapter Heading No. 3920 or 3921 and cut them into different sizes and shapes and the final product P.U. foam sheet covered under Chapter Heading 3926 was cleared to the customer after the payment of Excise duty (“the activity”).

The Department had taken a view that the activity undertaken by the Appellant does not amount to ‘manufacture’ and hence the availment of Cenvat credit on P.U. foam blocks was irregular. Later the Adjudicating Authority and the Commissioner (Appeals) confirmed the demand for recovery of the Cenvat credit irregularly availed along with imposition of interest and penalty.

Held:

Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai.

The Hon’ble CESTAT, Mumbai relied upon the following case laws:

• CCE Surat-III Vs. Creative Enterprises [2008 (7) TMI 311 - GUJARAT HIGH COURT)] further, upheld by the Hon'ble Supreme Court Commissioner Versus Creative Enterprises [2009 (7) TMI 1206 - SUPREME COURT]
• CCE, Pune-III Vs. Ajinkya Enterprises [2012 (7) TMI 141 - BOMBAY HIGH COURT]

and held the following:

• Neither the Adjudication Authority nor the Appellate Authority had disputed the classification of goods during the whole process. It shows that the original inputs i.e. P.U. foam block were converted into P.U. foam sheet, indicating that the original inputs, P.U. foam block, has undergone change and is now a product other than the inputs which were procured by the Appellant;
• Since the Appellant had discharged his duty liability on the final products which they had considered as manufactured product and the Department had also accepted the same, the Appellant is rightfully entitled to avail credit.

Therefore, the Hon’ble Tribunal allowed the Cenvat credit availed by the Appellant.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards,

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

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