2017 (2) TMI 198 - AT - Central Excise

Manufacture - cutting of jumbo rolls whether amounts to manufacture or not - CENVAT credit denied on the ground that the process does not amount to manufacture - Held that - the Tribunal in the case of Fine Packaging Pvt. Ltd 2016 (3) TMI 801 - CESTAT MUMBAI in the identical case, has held that Cenvat credit on the inputs used in the process which does not amount to manufacture, is admissible - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of Cenvat credit on Jumbo Rolls of PVC and aluminium Rolls after slitting.
2. Applicability of the decision in the case of SR Tissues Pvt. Ltd.
3. Invocation of extended period due to bonafide belief.
4. Interpretation of Rule 16 of the Central Excise Rules, 2002.

Analysis:
1. The appellant sought credit on Jumbo Rolls of PVC and aluminium Rolls after slitting them and clearing them on payment of Central Excise duty. The revenue denied Cenvat credit, citing that cutting of jumbo rolls does not constitute manufacture, referring to the decision in the case of SR Tissues Pvt. Ltd. The lower authorities upheld the demand, leading the appellants to approach the Tribunal.

2. The appellants argued that the products would have no commercial use unless cut to size, maintaining they issued invoices under a genuine belief as manufacturers, thus contesting the invocation of the extended period. The Learned Authorized Representative (AR) supported the impugned order, asserting that cutting/slitting does not amount to manufacture, aligning with the decision in the case of SR Tissues Pvt. Ltd.

3. The Tribunal referred to a previous ruling in the case of Fine Packaging Pvt. Ltd., emphasizing that even if the activity does not amount to manufacture, Cenvat credit on inputs is permissible under Rule 16 of the Central Excise Rules, 2002. The rule allows credit on duty-paid material treated as inputs for various processes. If the activity does not amount to manufacture, the manufacturer must clear the processed goods by paying duty equal to the Cenvat credit. The Tribunal upheld this interpretation, dismissing the Revenue's appeal.

4. Consequently, the Tribunal allowed the appeal, following the precedent set by the decision in Fine Packaging Pvt. Ltd. The judgment emphasized that Cenvat credit on inputs used in processes not amounting to manufacture is admissible under Rule 16. The impugned order was upheld, and the Revenue's appeal was dismissed, with the cross-objection also being disposed of in the process.

In conclusion, the Tribunal allowed the appeal, highlighting the admissibility of Cenvat credit on inputs even in cases where the activity does not amount to manufacture, as per the provisions of Rule 16 of the Central Excise Rules, 2002.