2012 (11) TMI 645 - AT - Central Excise

Cutting and slitting of HR/CR Coils and sheets - additional activities such as pickling and oiling - whether it amounts to manufacture? - cenvat credit - Held that - As till 1st March 2005 the Revenue has accepted that the activity carried on by the assessee constituted manufacturing activity in view of Board Circular dated 7th September 2001 and accordingly held that the assessee is entitled to take credit of duty paid on HR/CR coils. It is only because, the Board, on 2dn March 2005 has withdrawn the Circular dated 7th September 2001 the Revenue is claiming that the activity carried on by the assessee does not amount to manufacturing activity. It is relevant to note that the Board in its Circular dated 7th September 2001 had only held that the activity of cutting/slitting of HR/CR coils in to sheets or strips constitutes manufacture. Admittedly, the assessee had carried on additional activities such as pickling and oiling on the decoiled HR/CR coils, which is a complex technical process involving huge investment in plant and machinery. Since these additional activities were not considered by the Board in its Circular dated 7th September 2001, the withdrawal of the said Circular cannot be a ground to hold that the activity carried on by the assessee did not constitute manufacturing activity - in favour of assessee.

Issues:
1. Whether cutting and slitting of HR Coils and CRCA Sheets amount to manufacture for the purpose of availing credit.
2. Whether the assessee is entitled to retain the credit of duty paid on HR/CR Coils.
3. Validity of Circulars issued by the Board regarding the manufacturing process.
4. Justifiability of the demand raised by the Revenue.

Issue 1:
The primary issue in this case revolves around whether the activity of cutting and slitting of HR Coils and CRCA Sheets constitutes "manufacture" for the purpose of availing credit. The appellant contested the demand raised by the Revenue, arguing that the processes undertaken amount to manufacturing. The dispute stems from conflicting Circulars issued by the Board, with the appellant relying on past judgments and Circulars to support their claim.

Issue 2:
The second issue pertains to the entitlement of the assessee to retain the credit of duty paid on HR/CR Coils. The Revenue contended that the assessee wrongly availed credit and passed on the cost to buyers, justifying the demand raised. However, the appellate tribunal analyzed the historical context of Circulars and legal precedents to determine the correctness of the credit availed by the assessee.

Issue 3:
The validity of Circulars issued by the Board regarding the manufacturing process is a crucial aspect of this case. The appellant referenced Circulars issued by the Board over the years, highlighting the evolution of regulations and interpretations regarding the manufacturing activities in question. The tribunal scrutinized the impact of these Circulars on the dispute at hand to ascertain the legality of the demand raised by the Revenue.

Issue 4:
The final issue concerns the justifiability of the demand raised by the Revenue. The Revenue argued that the activity of decoiling HR/CR Sheets did not constitute manufacture, thereby challenging the appellant's right to credit. However, the tribunal examined the sequence of events, Circulars, and legal principles to determine the validity of the demand and the correctness of the credit availed by the assessee.

In a detailed analysis, the tribunal considered the historical context of Circulars, legal precedents, and the technical aspects of the manufacturing processes involved. The tribunal noted that until a specific Circular was withdrawn, the Revenue had acknowledged the manufacturing nature of the activity, allowing the assessee to claim credit. The tribunal emphasized that the withdrawal of a Circular should not automatically negate the manufacturing status, especially when additional technical processes were involved, as in this case.

The tribunal highlighted that the Board's Circulars did not address the full scope of the manufacturing activities, leading to ambiguity in the interpretation. Considering past judgments and industry practices, the tribunal concluded that the assessee's bona fide payment of duty on decoiled HR/CR coils justified the credit availed. The tribunal also cited precedents where the acceptance of duty on final products by the department validated the retention of CENVAT credit, even if the activity did not strictly amount to manufacture.

Ultimately, the tribunal dismissed the Revenue's appeal, upholding the decision that the assessee was entitled to retain the credit of duty paid on HR/CR Coils. The tribunal found no fault with the decision, citing relevant legal precedents and industry practices. The appeal was dismissed with no order as to costs, affirming the assessee's right to the credit in question based on the specific circumstances and legal principles involved.

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