2018 (7) TMI 675 - AT - Central Excise

CENVAT Credit - empty barrels - Bitumen was mixed with duty paid Superior Kerosene Oil (SKO) and thereafter packed in duty paid empty barrels. - Re-packing the same from bulk to small packs - Whether assessee have availed Cenvat Credit correctly or otherwise when the activity undertaken by them on the inputs according to Revenue does not amount to manufacture? Held that - The Hon ble High Court of Karnataka in the case of CCE, Bangalore-V v. Vishal Precision Steel Tubes & Strips Pvt. Ltd. 2017 (3) TMI 1287 - KARNATAKA HIGH COURT has held that When once duty is paid by the assessee treating the activity as manufacturing activity by the Department, CENVAT credit is available and there is no question of reversal of CENVAT credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of Cenvat Credit on duty paid SKO and barrels for packing Bitumen
- Whether the activity undertaken by the appellant amounts to manufacture

Issue 1: Availment of Cenvat Credit on duty paid SKO and barrels for packing Bitumen

The appellant, engaged in manufacturing and selling petroleum products, transferred Bitumen in bulk packs to their unit at Uluberia after payment of duty. The dispute arose regarding the availment of Cenvat Credit on duty paid SKO and barrels used for packing Bitumen. The adjudication order disallowed Cenvat Credit amounting to ?1,06,25,28,184 and imposed penalties. The appellant argued that the duty paid on cleared goods exceeded the Cenvat Credit availed, and no refund was claimed on the excess amount paid. The Revenue alleged wrongful availment of Cenvat Credit on SKO and barrels, contending that the activity did not amount to manufacture. The appellant cited relevant decisions to support their case.

Issue 2: Whether the activity undertaken by the appellant amounts to manufacture

The key question was whether the appellant correctly availed Cenvat Credit despite the Revenue's claim that the activity did not constitute manufacture. The Tribunal referred to decisions by the High Courts of Karnataka, Bombay, and Gujarat. The High Court of Karnataka held that if Cenvat credit availed on inputs was used for duty payment on the final product, there was no need to reverse the credit, even if the activity did not amount to manufacture. The Bombay High Court emphasized that if duty was paid on the final product treating it as manufactured, Cenvat credit could not be reversed. Similarly, the High Court of Gujarat stated that if the activity did not amount to manufacture, duty could not be levied, and Modvat credit could not be denied. The Tribunal, following these judicial pronouncements, set aside the impugned order and allowed the appeal of the assessee.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal based on the legal principles established by the High Courts' decisions. The impugned order disallowing Cenvat Credit was deemed unsustainable and set aside. The judgment highlighted the importance of utilizing Cenvat Credit for duty payment on the final product, even if the activity undertaken did not strictly qualify as manufacture, as per the relevant legal interpretations.