2023 (2) TMI 549 - HC - Central Excise

Wrongful availment of CENVAT Credit - C.R. Coils and Zinc inasmuch as the said goods were used in the process of galvanization of C.R. Coils for conversion into G.P. Coils - process amounting to manufacture or not - HELD THAT - In the present case, once the respondent had paid duty at the time of purchase of C.R. Coils and had taken Cenvat credit after galvanizing the sheets and took rebate of Rs.88,71,269/-, he could claim the benefit of Cenvat Credit deposited by him and this aspect has been considered by the High Court of Gujarat in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DELTA CORPORATION 2013 (2) TMI 31 - GUJARAT HIGH COURT . In that case, the High Court of Gujarat was examining the manufacturing activity of item called P.D. Pumps and after purchasing such pumps, the manufacturer availed Modvat credit under Rule 57A of the Central Excise Rules, 1944 - The view of the revenue was that the assessee had purchased the P.D. Pumps from its sister concern before clearance and the assessee was to reverse such credit. The High Court of Gujarat referred to Rule 57 F(1) of the Rules, 1944 and held that inputs in respect of which credit is allowed under Rule 57A, may be used in or in relation to manufacture of a final product or could also be removed under intimation to the specified authority for home consumption in the said factory. Sub-rule 3 of Rule 3 of the CENVAT Credit Rules, 2002 makes it very clear that the Cenvat credit may be utilized for payment of any duty of excise on any final products or for payment of duty on inputs of capital goods themselves if such inputs are removed as such or after being partially processed or such capital goods are removed as such. Appeal dismissed.

Summary

Issues involved: Appeal against disallowing Cenvat credit, interpretation of manufacturing process under Central Excise Act, applicability of CENVAT Credit Rules.

Analysis:
1. Appeal against disallowing Cenvat credit: The case involved an appeal by the revenue against a judgment allowing the respondent company to avail Cenvat credit on certain goods used in the manufacturing process. The Central Excise Officer observed that the company had wrongly availed Cenvat credit, leading to a show cause notice for disallowing the credit. The Commissioner confirmed the demand for Cenvat credit and imposed a penalty, which was challenged by the respondent before the Tribunal.

2. Interpretation of manufacturing process under Central Excise Act: The key issue revolved around whether the process of galvanization of certain goods amounted to 'manufacture' as per Section 2(f) of the Central Excise Act, 1944. The respondent argued that even if the conversion process did not amount to manufacture, they were entitled to clear the inputs after partial processing on reversal of the credit availed. The Tribunal referred to a judgment by the High Court of Gujarat, holding that credit cannot be denied solely based on the absence of a manufacturing activity.

3. Applicability of CENVAT Credit Rules: The revenue contended that since no manufacturing process was initiated, the respondent was not entitled to Cenvat credit under Rule 3 of the CENVAT Credit Rules, 2002. However, the Tribunal and the High Court of Gujarat's judgment in a similar case emphasized that Cenvat credit could be utilized for payment of duty on final products or inputs removed after partial processing, irrespective of whether a manufacturing process was involved.

In conclusion, the High Court dismissed the appeal, emphasizing that the CENVAT Credit Rules allowed for the utilization of credit for duty payment on final products or inputs removed after partial processing, regardless of the presence of a manufacturing process. The judgment highlighted the importance of interpreting the rules in favor of allowing credit utilization based on the specific provisions laid out in the CENVAT Credit Rules.