2024 (10) TMI 815 - AT - Central Excise

Process amounting to manufacture or not - Recovery of CENVAT Credit with interest allegedly taken erroneously without undertaking any manufacturing process alongwith direction for payment of equal penalty under Rule 14 15(2) of the CENVAT Credit Rules, 2004 read with Section 11A(5), 11AA and 11AC of the Central Excise Act, 1944 - HELD THAT - It has to be taken on record that w.e.f. 01.03.2003 certain goods undergoing packing, repacking, labelling, relabeling were to be considered as manufacture, even if it is not brought on record as to if the alleged product is goods specified in third schedule of the Central Excise Tariff Act and even if it is accepted that the process undertaken by the Appellant before submitting the products to clearance was not to be considered as manufacture, still Appellant had taken the stand even before the Adjudicating Authority that in such an event duty was refundable to it, which is admittedly much higher than the CENVAT Credit availed during the said period that was held by the Respondent-Department as inadmissible. Without going into the intricacy of the process of manufacture or the interpretation of provision of law dealing with such manufacturing process, in view of the settled position of law that has been reiterated by the Hon'ble Bombay High Court in the case of Ajinkya Enterprise 2012 (7) TMI 141 - BOMBAY HIGH COURT that when duty is accepted by the Department against clearance of a manufactured product, CENVAT Credit availed by the manufacturer can t be denied to it. The order passed by the Commissioner of Central Excise (Appeals), Mumbai-II is hereby set aside with consequential relief of refund of credit, that was reversed by the Appellant, with applicable interest as per law and the Respondent-Department is directed to pay the same within two months of receipt of this order - Appeal allowed.

Summary

Issues:
Recovery of CENVAT Credit with interest and penalty under CENVAT Credit Rules, 2004 and Central Excise Act, 1944 for the disputed period.

Analysis:
The judgment dealt with the direction for the recovery of CENVAT Credit amounting to Rs. 25,61,369/- along with interest and penalty under Rule 14 & 15(2) of the CENVAT Credit Rules, 2004, read with relevant sections of the Central Excise Act, 1944. The Appellant was engaged in cutting, labeling, and packing goods like transmission belts, conveyors belts, etc., treating it as manufacturing of excisable goods. The Central Excise Audit raised objections stating that the activities undertaken did not amount to manufacturing, proposing the denial of CENVAT Credit. The Appellant was issued a show-cause notice, and the recovery proposal was confirmed through an adjudication order, which the Appellant challenged before the Tribunal.

During the appeal hearing, the Appellant's counsel argued that the processes undertaken, including cutting, physical checking, logo substitution, and packing, constituted manufacturing. He cited precedents from the Bombay High Court and the Gujarat High Court, emphasizing that once duty on the final product is accepted, CENVAT Credit need not be reversed, even if the activity does not amount to manufacturing. The Appellant also contended against the invocation of the extended period, asserting no suppression of facts or willful misstatement to evade duty.

In response, the Authorized Representative for the Respondent supported the order passed by the Commissioner (Appeals) and referred to a CBEC Circular emphasizing non-availability of CENVAT Credit if the process does not amount to manufacturing. He argued that mere cutting of conveyor belts does not constitute manufacturing unless it transforms the product, seeking no interference in the Commissioner's order.

The Tribunal analyzed the case record, relevant laws, notifications, and judgments. It noted that even if the process undertaken did not amount to manufacturing, the Appellant had claimed that duty was refundable, higher than the CENVAT Credit availed. Relying on the settled legal position reiterated by the Bombay High Court, the Tribunal held that when duty is accepted against clearance of a manufactured product, CENVAT Credit cannot be denied. Consequently, the Tribunal allowed the appeal, setting aside the Commissioner's order and directing the Respondent-Department to refund the reversed credit with applicable interest within two months.

This judgment provides clarity on the application of CENVAT Credit rules concerning manufacturing processes and duty payments, emphasizing the importance of legal precedents in determining the admissibility of credits in excise matters.