2024 (3) TMI 179 - AT - Central Excise

CENVAT Credit - process amounting to manufacture or not - repacking of the goods from bulk to small packs in drums/barrels to cater to the requirement of the industrial consumers - it is the case of the revenue that as no/new separate commodity emerges as a result of repacking of the said goods into smaller drums/barrels they are not eligible for availment of credit on the inputs - HELD THAT - It is evident that the dispute as to whether the processes undertaken the appellant at their factory, amounted to manufacture or not, was well within the knowledge of the Department, as early as in 2008 and multiple queries have been shown to be made by audit. Each time the appellant have replied to such queries. Since the matter has been well within the knowledge of the Department at all times, the question of invoking of proviso to Section 11A(1) of the Central Excise Act, 1944, does not arise and the demand is entirely barred by limitation. There is no doubt that the appellant did avail Cenvat Credit on the goods received by them at their factory premises and after processing, they have paid the duty higher than the Cenvat Credit availed. It has been held by various judicial bodies that where credit has been availed of and duty paid, which was not lesser in amount than the credit availed, there is no need for initiation of proceeding against the assessee. In a catena of decisions it has been held that when final product is treated as dutiable and duty paid thereon, the facility of Cenvat Credit is open to them and there is no question of the reversal of the said credit. The Cenvat Credit availed by the appellant is not deniable. The impugned order of the lower authority is vexatious in law and fails to succeed both on the grounds of limitation as well as merits - Appeal allowed.

Summary

Issues Involved:
1. Whether the repacking of aromatic solvents amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.
2. Whether the demand for Cenvat Credit is barred by limitation.
3. Whether the appellant is liable to pay interest and penalty under the Cenvat Credit Rules, 2004 and the Central Excise Act, 1944.

Summary:

Issue 1: Repacking as Manufacture
The core issue revolves around whether repacking aromatic solvents from bulk to smaller packs constitutes "manufacture" under Section 2(f) of the Central Excise Act, 1944. The revenue contended that repacking does not result in a new product and thus does not qualify as manufacture, making the appellant ineligible for Cenvat Credit on inputs. The appellant argued that they performed significant processes like filtration, acid treatment, blending, and mixing to meet customer specifications, which should qualify as manufacture.

Issue 2: Limitation
The appellant contended that the demand is mostly barred by limitation since the show cause notice was issued on 26.04.13 for the period 2009-10 to 2012-13. They argued that there was no suppression of facts or willful misstatement, as they had consistently communicated their manufacturing processes to the department. The Tribunal noted that the department was aware of the appellant's activities as early as 2008, and repeated audits had not raised objections until the present audit, making the invocation of the extended period of limitation inappropriate.

Issue 3: Interest and Penalty
The Tribunal observed that the appellant had paid higher duty on the processed goods than the Cenvat Credit availed, making the case revenue neutral. Citing various judicial precedents, the Tribunal held that when the final product is treated as dutiable and duty is paid, the facility of Cenvat Credit is justified, and there is no need for reversal of credit. The Tribunal referenced multiple cases supporting this view, including Commissioner of Central Excise Pune-III Vs. Ajinkya Enterprises and Commissioner of Central Ex. & Cus., Surat-III Vs. Creative Enterprises.

Conclusion:
The Tribunal concluded that the processes undertaken by the appellant amounted to manufacture under Section 2(f) of the Central Excise Act, 1944. The demand for Cenvat Credit was barred by limitation, and the proceedings were deemed unnecessary due to the revenue-neutral nature of the case. The impugned order was set aside, and the appeal was allowed with consequential relief as per law.