2019 (12) TMI 1122 - AT - Central Excise

Reversal of CENVAT Credit - process amounting to manufacture or not - activity of cutting and slitting of Brass Strips Phosphor Bronze Strips and Copper Strips - HELD THAT - The appellant is engaged in the activity of cutting and slitting of Brass Strips Phosphor Bronze Strips and Copper Strips falling under Chapter Sub-heading 7409 2100 7409 1100 and 7409 3100 of the First Schedule of the Central Excise Tariff Act (CETA) 1985. Also while procuring the raw materials appellant has paid the full amount inclusive of excise duty and thereafter availed CENVAT credit of the duty paid on inputs and after converting the coils into strips by undertaking portion of slitting and cutting clearing the final goods by utilizing the CENVAT credit availed on inputs as also in cash. The appellant had a bona fide belief that their activity amounts to manufacture and they have taken the registration by disclosing the complete facts and has been paying duty from time to time on clearance of final products which is also not disputed by the department - Appellants have also produced ER-1 returns for the disputed period wherein the details of CENVAT credit availed in respect of inputs and the duty paid on the final products are clearly shown - Further in total the appellants have availed CENVAT credit to the tune of 90, 89, 714/- during the relevant period but had paid an amount of 97, 41, 477/- which is more than the credit availed by them. This issue is squarely covered by the decision in ASHOK ENTERPRISES VERSUS COMMISSIONER OF CENTRAL EXCISE CHENNAI 2007 (11) TMI 67 - CESTAT CHENNAI where it was held that even if duty wasn t payable on final good (there being no manufacture) there was no question of recovery of credit having been utilized towards payment of duty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Irregular CENVAT credit availed by the appellant.
2. Whether cutting and slitting of coils into strips amounts to manufacture.

Analysis:

Issue 1: Irregular CENVAT credit availed by the appellant:
The appeal was against the order confirming the demand for irregular CENVAT credit amounting to ?90,89,714/- under Rule 14 of CENVAT Credit Rules, 2004. The appellant contended that they were entitled to the credit based on previous Tribunal decisions. They argued that the credit had been utilized towards duty payment on cleared goods, which meant it had already been reversed. The appellant also highlighted that various Tribunal decisions supported their position, emphasizing that the credit availed on inputs should not be reversed if utilized for cleared goods, even if the process did not amount to manufacture. The appellant's counsel further mentioned that the appellant was entitled to avail and pass on the credit as a trader, as established in a previous order.

Issue 2: Whether cutting and slitting of coils into strips amounts to manufacture:
The Commissioner had denied CENVAT credit to the appellant, stating that the activity did not amount to manufacture. However, the Tribunal found that the appellant was engaged in cutting and slitting of Brass, Phosphor Bronze, and Copper Strips, paying excise duty on raw materials, and availing CENVAT credit on inputs. The Tribunal noted that the appellant believed their activity constituted manufacturing, had disclosed complete facts to the department, and had been paying duty on final products. The Tribunal also observed that the appellant had availed more credit than utilized, as evidenced by ER-1 returns. Relying on previous Tribunal decisions, the Tribunal concluded that the duty paid on final products should be considered as reversal of ineligible credit on inputs, and the appellant should not be required to pay the credit again. The Tribunal found the impugned order unsustainable in law and allowed the appellant's appeal.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellant based on the legality of the CENVAT credit availed and the activity of cutting and slitting coils into strips not amounting to manufacture.