2016 (3) TMI 775 - AT - Central Excise

Disallowance of Cenvat Credit on bright bars used as inputs for manufacture of motor vehicles parts - Held that - Interestingly, although the Apex Court in its judgment dated 20.09.1994 in CCE, Chandigarh Vs. Vee Kayan Industries (1994 (9) TMI 97 - SUPREME COURT OF INDIA ) had held that the 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 in clarification to trade notice No. 18/2003. 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 notice. 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. See decision in Light Lift Industries vs. CCE, Delhi-IV-2010 (2009 (11) TMI 796 - CESTAT NEW DELHI) wherein it has been held that the credit is admissible on bright bars. Further, when inputs is received by the appellant and used in or in relation to manufacture of final product and payment of duty is evidenced by the invoices, credit cannot be denied. The question whether the input is the result of a process of manufacture is irrelevant. What is relevant is whether duty has been paid or not on such input. - Decided in favour of assessee

Summary

Issues:
Challenge to disallowance of Cenvat Credit on bright bars used as inputs for manufacturing motor vehicle parts.

Analysis:
The appellant, engaged in manufacturing goods falling under a specific chapter of the First Schedule to the CETA, availed credit on duty paid inputs, including bright bars. However, it was observed that the appellant wrongly claimed credit on bright bars, as per the Hon'ble Supreme Court's decision in a previous case where it was held that bright bars were not excisable commodities as no manufacturing process was involved in their transformation from wire rods/rounds. This led to a show cause notice disallowing the credit and imposing penalties, which was upheld by the Commissioner (Appeals), prompting the appellant to appeal before the Tribunal.

The key contention revolved around whether the appellant was entitled to credit on duty paid bright bars used as inputs, considering that the supplier of the bright bars was not liable to pay duty on these items due to the lack of a manufacturing process in their transformation. Despite no dispute regarding the payment of duty on bright bars or their use in manufacturing final products, the department sought to deny credit based on the argument that these goods were not excisable at the supplier's end. Interestingly, while a previous Supreme Court judgment stated that the process of transforming round bars into bright bars did not amount to manufacture, the Department had issued trade notices indicating otherwise, leading to confusion and protective demands.

In the appellant's defense, reliance was placed on a previous decision where it was held that credit on bright bars is admissible if the inputs are used in manufacturing the final product and duty payment is evidenced by invoices, irrespective of whether the input underwent a manufacturing process. Ultimately, the Tribunal set aside the impugned order, allowing the appeal with any consequential reliefs deemed necessary.