2019 (2) TMI 72 - AT - Central Excise

Process amounting to Manufacture or not - clutch assemblies received from their Unit-I - main allegation of the department is that clutch assemblies received from their Unit-I did not undergo any manufacturing activities such as packing / repacking, labelling / relabeling, affixing of new M.R.P rates - principles of natural justice - Held that - The adjudicating authority has not addressed or analysed the data supplied by the appellants. The adjudicating authority has also not addressed the claim of the appellants that wherever there has been no deemed manufacture as per Section 2f (3) of the Act, they have reversed the credit in terms of Rule 3 (5) of CCR and that for export clearances they are not required to reverse the credit availed by them at the input stage. While the appellants have given the data as mentioned above, it is not clear therefrom as to what quantum of goods were subjected to processes amounting to deemed manufacture and / or on which M.R.P was revised upwards resulting in discharge of differential duty liability. So also, the data with regard to clearances of inputs as such by reversing cenvat credit availed thereon under Rule 3 (5) ibid has also not been separately indicated. While the adjudicating authority has not adequately addressed the various contentions and submissions of the appellant made by the appellant during the adjudication proceedings, the appellant themselves have not submitted clear break up each type of removals of the goods received by them from Unit-I. So also, while appellants have submitted information in respect of credit reversed due to export, no details have been given with regard to value or quantum of exports concerned and the datas of such export - the matter requires to be remanded to the adjudicating authority for de novo consideration. Penalty - Held that - The entire dispute pertains to interpretation of the provisions relating to deemed manufacture and in particular, the eligibility to avail cenvat credit on goods - also appellants have consistently provided all the necessary details to the department as and when called for including reply dt. 13.10.2011 in response to audit party s queries dt. 6.9.2011 - penalty not warranted and is set aside. Appeal allowed in part and part matter on remand.

Issues Involved:
1. Eligibility of Cenvat credit on goods received from Unit-I.
2. Allegation of logistics purpose and lack of manufacturing activity.
3. Denial of Cenvat credit jurisdiction.
4. Compliance with Central Excise Rules and Cenvat Credit Rules.
5. Penalty imposition and extended period of limitation.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Goods Received from Unit-I:
The appellant, a manufacturer of clutches, received goods from Unit-I and other vendors. The Department argued that goods from Unit-I did not undergo manufacturing activities like packing, repacking, or labeling, thus not qualifying as inputs under Section 2(f) of the Central Excise Act, 1944. The appellant contended that goods received were cleared on payment of duty, and the denial of Cenvat credit was without jurisdiction, citing precedents like Commissioner v. Creative Enterprises and CCE, Bangalore v. Vishal Precision Steel Tubes & Strips Pvt Ltd. The Tribunal noted that Section 2(f)(iii) includes processes like packing or repacking and labeling as manufacturing activities. However, the appellant failed to provide clear data on the quantum of goods subjected to these processes.

2. Allegation of Logistics Purpose and Lack of Manufacturing Activity:
The Department alleged that goods from Unit-I were received merely for logistics purposes without any manufacturing activity. The appellant argued that such claims were based on assumptions without material evidence. They maintained that goods were cleared after processes amounting to deemed manufacture or exported, thus eligible for Cenvat credit. The Tribunal found that the adjudicating authority did not adequately address the data provided by the appellant regarding the manufacturing activities performed.

3. Denial of Cenvat Credit Jurisdiction:
The appellant argued that the denial of Cenvat credit was without jurisdiction as the assessment of goods and payment of duty were accepted by the Department. They cited cases where such denial was deemed without jurisdiction when the assessment remained undisturbed. The Tribunal noted that the appellant had consistently maintained that goods received from Unit-I were cleared on payment of duty under Section 4A after necessary processes, and credit was reversed when goods were exported or cleared as such.

4. Compliance with Central Excise Rules and Cenvat Credit Rules:
The appellant provided detailed submissions and evidence of compliance with Central Excise Rules and Cenvat Credit Rules, including letters and returns submitted to the Department. They argued that credit was taken on goods as inputs, and appropriate duty was paid when activities amounted to manufacture. The Tribunal found that the appellant had provided necessary details, but the adjudicating authority failed to analyze this data adequately. The Tribunal directed a de novo consideration, requiring the appellant to submit detailed information on each type of clearance and processes amounting to deemed manufacture.

5. Penalty Imposition and Extended Period of Limitation:
The appellant argued that the entire demand was hit by limitation as all transactions were covered by invoices and reflected in returns, with no deliberate suppression of facts. The Tribunal found that the dispute pertained to the interpretation of provisions relating to deemed manufacture and eligibility for Cenvat credit. They noted that the appellant had consistently provided necessary details to the Department, and hence, penalties imposed were uncalled for and set aside. The Tribunal also found the demand of ?90,85,559/- unjustified as it amounted to double jeopardy, being part of the larger demand of ?11,54,59,277/-.

Conclusion:
The appeal was partly allowed and partly remanded for de novo consideration, requiring detailed information from the appellant on each type of clearance and processes amounting to deemed manufacture. The penalties imposed were set aside, and the demand of ?90,85,559/- was deemed unjustified and set aside.

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