2014 (7) TMI 523 - AT - Central Excise

Benefit of CENVAT credit - Revenue contends that activity of de-coiling the sheets, cutting to length, shearing and other activity like de-greasing, cleaning, etc. did not amount to manufacture and amounted to removal of inputs as such and accordingly the CENVAT credit availed was proposed to be disallowed - Held that - There is no loss of revenue as the appellant had cleared the goods with value addition which have resulted in payment of excess duty to the tune of ₹ 50,40,102. The next ground taken is that the allegation in the show cause notice is self-contradictory as on the one hand it is alleged that the activity of de-coiling, cutting, slitting, cleaning, etc. does not amount to manufacture whereas on the other hand, in para 17 of the show cause notice it is observed that the average value of the inputs in question i.e., GP coils was ₹ 35,779/- PMT and slit coils was ₹ 38,609/- PMT whereas the average assessable value of the GP coils sheets and cut to length sheets was ₹ 38,015/- PMT and ₹ 38,763/- PMT respectively. It is further observed that the appellant cleared the goods in question after value addition on the inputs and also observed that the credit of input was availed at rate less than the duty rate at which the final products were cleared by the appellant. Thus, on the facts of the case, this itself proves that the inputs having subjected to processing resulting in value addition as the same have been cleared at appropriate rate of duty which is higher and it cannot be said that the inputs are cleared as such. There is definitely some value addition involved as the goods in question have been removed at a higher rate of duty resulting into additional duty to the exchequer of ₹ 50.40 lakhs. Further, we find that the facts and circumstances of the present case are squarely covered by the ruling of the Hon ble Bombay High Court in the case of Ajinkya Enterprises (2012 (7) TMI 141 - BOMBAY HIGH COURT) - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of CENVAT credit for manufacturing activity.
2. Allegation of removal of inputs without manufacturing process.
3. Contradictory claims in the show cause notice.
4. Registration for manufacturing activity.
5. Value addition and payment of excess duty.
6. Denial of CENVAT credit and double taxation.
7. Preclusion from denying CENVAT credit after accepting duty.

Analysis:
1. The appellant, a manufacturer of color coated steel coils and sheets, faced disallowance of CENVAT credit for alleged non-manufacturing activities. The appellant utilized spare capacity to convert GP coils into cut-to-size sheets, leading to a dispute on the manufacturing process's classification.

2. Show cause notices were issued, contending that certain activities did not amount to manufacturing but were mere removal of inputs. The appellant contested these allegations, emphasizing the value addition and payment of excess duty on the cleared goods.

3. The appellant raised concerns about contradictory claims in the show cause notice, highlighting discrepancies between the alleged non-manufacturing activities and the observed value addition in the final products, leading to confusion in the assessment.

4. The appellant's registration with the Central Excise department for manufacturing color sheets, including cutting and slitting activities, was cited to support the contention that the disputed activities were part of the regular manufacturing process.

5. The appellant argued that the excess duty paid on the cleared goods demonstrated value addition, justifying the utilization of CENVAT credit and negating any revenue loss, emphasizing the revenue-neutral nature of the transactions.

6. Concerns were raised regarding the denial of CENVAT credit potentially resulting in double taxation, especially when the department had accepted the duty payment on the final products, implying a contradictory stance by the Revenue.

7. The decision highlighted the value addition in the goods, leading to additional duty collection for the exchequer. Citing precedents and the Bombay High Court ruling in a similar case, the Tribunal allowed the appeals, setting aside the impugned order and providing consequential relief.

This comprehensive analysis delves into the various issues raised in the legal judgment, addressing the complexities of the dispute over CENVAT credit disallowance and the classification of manufacturing activities, ultimately resulting in a favorable outcome for the appellant based on the principles of value addition and legal precedents.