2014 (4) TMI 872 - AT - Central Excise

Waiver of pre deposit - Availment of CENVAT Credit - Held that - Prima facie, I find that in this case the only ground on which the department seeks to denying the Cenvat credit to the appellant is that the activity of the supplier M/s Tata Ryersons does not amount to manufacture and as such the amount paid by the supplier to the department in respect of clearances of the cut CR sheets is not central excise duty. Prima facie, I find that there is no evidence that the assessment of duty at the end of M/s Tata Ryersons has been reviewed. It is well settled law that Cenvat credit to a manufacturer in respect of certain inputs received by him cannot be denied by his Jurisdictional Central Excise Authorities by seeking to review the assessment at the end of the supplier Apex Court s judgment in the case of CCE vs. MDS Switchgear Ltd. reported in 2008 (8) TMI 37 - SUPREME COURT . In view of this, the impugned order does not appear to be correct and, as such, the appellant have a strong prima facie case in their favour. The requirement of pre-deposit of Cenvat credit demand, interest and penalty is, therefore, waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal - Stay granted.

Summary

Issues:
1. Eligibility of Cenvat credit for cut CR sheets received from supplier.
2. Validity of show cause notice invoking extended period.
3. Denial of Cenvat credit based on the activity of the supplier not amounting to manufacture.
4. Prima facie case for waiver of pre-deposit of Cenvat credit demand, interest, and penalty.

Analysis:

1. The appellant, a manufacturer of sheet metal parts, received cut cold rolled sheets from a supplier and claimed Cenvat credit for the same. The department contended that since the supplier's activity of cutting CR coils into sheets did not constitute manufacture, the appellant was not eligible for the credit. A show cause notice was issued alleging suppression of facts and demanding the credit amount. The Additional Commissioner confirmed the demand with penalties, which was upheld by the Commissioner (Appeals), leading to the current appeal and stay application.

2. The appellant argued that a previous tribunal order recognized the supplier's activity as manufacture since duty was paid, thus entitling them to the credit. They also claimed the demand was time-barred and there was no suppression of facts. The Departmental Representative opposed the stay application, emphasizing the non-manufacture status of the supplier's activity as the basis for denying credit.

3. The presiding judge considered both arguments and found that the department's denial of credit was solely based on the supplier's activity not amounting to manufacture. The judge noted that if duty was collected from the supplier for their activity, denying credit to the appellant would be unjust. Referring to a Supreme Court judgment, the judge highlighted that the Central Excise Authorities cannot review the supplier's duty assessment to deny the manufacturer's credit. Consequently, the judge found a strong prima facie case in favor of the appellant and waived the pre-deposit requirement, staying the recovery until appeal disposal.

4. In conclusion, the judge allowed the stay application, emphasizing the appellant's prima facie case and the improper basis for denying the Cenvat credit. The decision was made in favor of the appellant, highlighting the legal principle that credit entitlement should not be affected by the supplier's duty assessment.