2012 (10) TMI 914 - AT - Central Excise

Denial of Cenvat Credit - Following the decision of court in case of CCE V/s. Creative Enterprises 2008 (7) TMI 311 - GUJARAT HIGH COURT Held that - Once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity does not amount to manufacture - appeal allowed with consequential relief, if any - stay application is also disposed of.

Summary

Issues:
Denial of CENVAT credit for sorting and repacking process.

Analysis:
The judgment by the Appellate Tribunal CESTAT Mumbai involves an appeal against the denial of CENVAT credit amounting to Rs.9,17,167 to the appellant, M/s IVP Ltd., for their sorting and repacking process. The issue was whether this process qualifies as "manufacture" under Section 2(f) of the Central Excise Act, 1944, entitling them to the credit. The lower adjudicating authority had denied the credit, imposed penalties, and confirmed the demand along with interest, which was upheld in the appeal before the lower appellate authority.

The appellant argued that previous judgments by the Hon'ble High Courts of Bombay and Gujarat supported their case. These judgments stated that if an assessee has paid higher duty on cleared goods after a process accepted by the department, the department cannot demand reversal of CENVAT credit. The learned Dy. Commissioner also conceded that the issue was settled in favor of the appellant based on these judgments.

The Appellate Tribunal, after considering the submissions, noted that the issue was narrow. Referring to the judgment of the Hon'ble High Court of Bombay in the Ajinkya Enterprises case and the High Court of Gujarat in the Creative Enterprises case, the Tribunal held that once duty on final products is accepted by the department, CENVAT credit need not be reversed even if the activity does not amount to manufacture. The Tribunal, therefore, allowed the appeal and disposed of the stay application in favor of the appellant.

In conclusion, the judgment clarified that the appellant was entitled to the CENVAT credit for the sorting and repacking process, as supported by previous court decisions. The Tribunal's decision was based on the principle that if duty on final products is accepted by the department, the CENVAT credit availed need not be reversed, even if the activity does not strictly qualify as manufacture.