2018 (5) TMI 479 - AT - Central Excise

CENVAT credit - inputs - denial on the ground that the processes undertaken by the appellant do not amount to manufacture - whether the demand / recovery of the credit availed by the appellant alleging that the process does not amount to manufacture is sustainable or not? - Held that - the Board Circular No. 211/08/2005 dated 2.3.2005 has clarified that the activity does not amount to manufacture. This clarification is pursuant to the Hon ble Delhi High Court and Hon ble Supreme Court s decision - In the present case, without entering into the controversy whether the activity amounts to manufacture or not, we are of the view that when Board having issued Circular No. 584/21/2001 dated 7.9.2001 clarifying that the activity amounts to manufacture and collected excise duty, cannot later turn around and deny the credit alleging that the activity is not manufacture. When the duty has been discharged by the appellant for a prolonged period, the department thereafter cannot turn around and deny the credit alleging that the process does not amount to manufacture based upon new decisions evolved. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of CENVAT credit on inputs due to the manufacturing process.
2. Whether cutting and slitting of coils amount to manufacture.
3. Validity of demand for recovery of wrongly availed credit.
4. Interpretation of relevant legal precedents and circulars.

Analysis:
1. The case involved a dispute regarding the eligibility of CENVAT credit on inputs for the manufacturing of CRGO core laminations. The appellant claimed that the processes undertaken, including cutting and slitting of coils, amounted to manufacturing. The Department disagreed, issuing a show cause notice for recovery of wrongly availed credit, along with penalties and interest. The Commissioner confirmed the demand, leading to the appeal before the Tribunal.

2. The appellant argued that the processes undertaken, such as de-rolling, de-burring, and recoiling, in addition to cutting and slitting, collectively incorporated necessary properties into the coils, thus constituting manufacturing. They cited a High Court judgment recognizing them as manufacturers, and an Income Tax case where the process was deemed as manufacturing. The appellant contended that denial of credit based on Board circulars was unjustified, especially when duty on finished products was accepted.

3. The Department, represented by the ld. AR, reiterated the findings of the impugned order, emphasizing that cutting and slitting of coils did not amount to manufacture based on High Court and Supreme Court decisions. They argued that the demand for recovery of credit was legal and proper, supported by the Board's circular clarifying the non-manufacturing nature of the process.

4. After hearing both sides, the Tribunal considered the issue of whether the demand for credit recovery was sustainable. Despite differing judicial interpretations and circulars, the Tribunal relied on the principle that once duty had been discharged for a prolonged period, the Department could not later deny credit based on evolving interpretations. Citing the Ajinkya Enterprises case, the Tribunal held that the impugned order could not stand, setting it aside and allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the importance of consistency in applying tax laws and honoring past practices of duty payment. The judgment highlighted the significance of prior acknowledgments of manufacturing activities and the unfairness of retroactively denying credits based on new interpretations.