2015 (11) TMI 772 - AT - Central Excise

Disallowance of Cenvat credit - bright bars - benefit of credit is sought to be denied on the ground that on the end of the supplier these goods were not excisable goods - Held that - processing of round bars into Bright bars would not amount to manufacture, the Department by Trade Notice No. 18/2003 dated 14/08/2003 had clarified that the process of making bright bars from wire rods amounts to manufacture. Duty was being collected upon bright bars and credit was being availed on such goods. A further trade notice dated 16/06/2004 was issued as clarification to trade notice No. 18/2003 stating that there is no process of manufacture. The demand is raised for the period after 16.6.2004. It is discussed by the Commissioner (Appeals) that the issue was contentious and involved interpretation and therefore protective demands were issued during that time. It is seen that the cases were kept pending in the call books after issuance of show cause notices. Thereafter the matter has been adjudicated and order passed. This goes to show that the Department itself was under much confusion as to whether excise duty is to be collected or not on bright bars. - impugned order is set aside. - Decided in favour of assessee.

Summary

Issues:
Challenge to disallowance of Cenvat credit on 'bright bars' used as inputs.

Analysis:
1. The appeal challenges the disallowance of Cenvat credit on 'bright bars' used as inputs based on the Supreme Court ruling in M/s Vee Kayan Industries case, which held that no process of manufacture was involved in transforming 'bright bars' from round bars, making them non-excisable. Consequently, the appellant was issued a show cause notice, leading to disallowance of credit, duty demand, interest, and penalty. The Commissioner (Appeals) upheld the decision, prompting the appeal to the Tribunal.

2. The issue revolves around whether the appellant is entitled to credit on duty paid for 'bright bars' used in manufacturing finished goods. The Department argues that the manufacturer supplying 'bright bars' was not liable to pay duty as no manufacturing process was involved, thus denying the appellant credit. However, the appellant paid duty on 'bright bars,' used them in production, and had valid documents for credit. The confusion arose from conflicting interpretations by the Department, with trade notices alternately affirming and denying the manufacturing process involved in 'bright bars.'

3. Despite the Supreme Court's stance that transforming round bars into 'bright bars' does not constitute manufacture, subsequent trade notices and conflicting interpretations by the Department caused uncertainty. The Tribunal, citing precedent in CCE vs. Deepthi Formulations Ltd, emphasized that if duty was paid on the input and used in manufacturing, credit cannot be denied based on the manufacturing process. Consequently, the impugned order disallowing credit on 'bright bars' was set aside, and the appeal was allowed with any consequential reliefs.