2024 (6) TMI 1261 - AT - Central Excise

CENVAT Credit availed on the imported goods - manufacturing activity or not - manufacture and clearance of PVC Tin Stabilizer, PVC Stabilizer, Calcium Zinc PVC Stabilizer, Oxidized Veg. Oil (Epoxy Plasricizer) - HELD THAT - Even without deciding the issue whether the activity carried out by the appellant is amount to manufacture or otherwise. This case can be decided on other issue. It is found that the appellant have made a submission that even though there is no manufacture but the assessee has paid the excise duty, hence, the Cenvat credit on the imported goods cannot be denied. From the judgment in AJINKYA ENTERPRISES VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2013 (6) TMI 610 - CESTAT MUMBAI and COMMISSIONER OF CENTRAL EX. CUS., SURAT-III VERSUS CREATIVE ENTERPRISES 2008 (7) TMI 311 - GUJARAT HIGH COURT , it can be seen that even though the activity does not amount to manufacture but if the assessee has chosen to pay the excise duty on the processed goods (whether it amount to manufacture or otherwise). The assessee cannot be denied the Cenvat credit. In the present case, it is seen that the appellant have already paid the amount in the form of excise duty which is equivalent to Cenvat credit availed. For this reason also the payment of duty by the appellant is as good as payment of Cenvat credit availed on the imported goods. Therefore, no show cause notice was required to be issued hence, the appellant had already made good by paying the duty which is nothing but reversal of Cenvat credit taken on the imported goods. Accordingly, neither any show cause notice was required nor the consequential interest and penalties is required to be recovered. The assessee can take the Cenvat credit even though their activity does not amount to manufacture and clear the same on payment of duty. Therefore, the entire transaction of the appellant is squarely covered by the provision of Rule 16 of Central Excise Rules, 2002 therefore, for this reasons the contention of the department that since no manufacturing activity is involved appellant is not entitled for the Cenvat credit, clearly fails on that basis. The entire proceeding of confirmation of demand, interest and penalty is not sustainable. The impugned order is not sustainable and is set aside - appeal allowed.

Summary

Issues Involved:
1. Whether the appellant's activity of labeling on imported goods amounts to "manufacture" under Chapter 39 of the Central Excise Tariff Act, 1985.
2. Whether the appellant is entitled to avail Cenvat credit on the imported goods.
3. Whether the demand for Cenvat credit, interest, and penalties is sustainable.
4. Whether the extended period of limitation is applicable in this case.

Detailed Analysis:

Issue 1: Whether the appellant's activity of labeling on imported goods amounts to "manufacture" under Chapter 39 of the Central Excise Tariff Act, 1985.

The department argued that the appellant did not carry out any manufacturing activity on the imported goods, such as 'PVC Processing Aid' and 'PVC Impact Modifier,' and merely re-labeled the bags. The appellant contended that the activity of labeling on the other side of the bag is covered under the chapter note of Chapter 39, which amounts to manufacture. However, the tribunal found it unnecessary to decide whether the activity amounts to manufacture, as the case could be resolved on other grounds.

Issue 2: Whether the appellant is entitled to avail Cenvat credit on the imported goods.

The appellant argued that even if the activity does not amount to manufacture, they have been paying excise duty on the goods cleared, which is equivalent to the Cenvat credit availed. The tribunal agreed, citing various judgments that held if an assessee pays excise duty on processed goods, the Cenvat credit on the imported goods cannot be denied. Notably, the tribunal referred to the judgments in Ajinkya Enterprises v. CCE, Pune-III and Commissioner of Central Ex. & Cus., Surat-III v. Creative Enterprises, which affirmed that payment of excise duty amounts to reversal of Cenvat credit.

Issue 3: Whether the demand for Cenvat credit, interest, and penalties is sustainable.

The tribunal found that since the appellant had already paid the excise duty equivalent to the Cenvat credit availed, no show cause notice was required. Consequently, the demand for interest and penalties was also deemed unsustainable. The tribunal further noted that the appellant's activity is covered by Rule 16 of the Central Excise Rules, 2002, which allows for Cenvat credit even if the activity does not amount to manufacture, provided the duty is paid upon clearance.

Issue 4: Whether the extended period of limitation is applicable in this case.

The appellant argued that there was no suppression of facts, as they had been clearing goods on payment of duty and declaring the same in their monthly returns. The tribunal did not explicitly address this issue in the final ruling, focusing instead on the broader principle that payment of excise duty suffices for the reversal of Cenvat credit.

Conclusion:

The tribunal set aside the impugned order, ruling that the appellant is entitled to avail Cenvat credit on the imported goods. The tribunal found that the payment of excise duty by the appellant is equivalent to the reversal of Cenvat credit, making the demand for interest and penalties unsustainable. The appeal was allowed with consequential relief, if any.