2024 (11) TMI 124 - AT - Central Excise

Rejection of Assessee s appeal on the ground of non-compliance of payment of pre-deposit as required under provisions of Section 35 F of the Central Excise Act, 1944 - CENVAT credit - process amounting to manufacture or not - activities of packing/ re-packing/ labelling/ re-labelling/ affixing of new MRP on the goods clutches for automobiles falling under CETH 87089300. Whether the Appellant is eligible to avail CENVAT credit on the clutches received from their Unit 1 when there is no process of manufacturing involving packing or re-packing of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer as contemplated in Section 2(f)(iii) of the Central Excise Act, 1944? HELD THAT - The admitted facts are that the Appellant is engaged in the activities of packing/ re-packing/ labelling/ re-labelling/ affixing of new MRP on the goods Clutches procured from their vendors which amount to manufacture in terms of Section 2(f)(iii) of the Central Excise Act, 1994 which were cleared on payment of duty under Section 4A of the Central Excise Act, 1944. However, in respect of the goods procured from their Unit 1 from 01.04.2012 to 09.05.2012 which were not subjected to the above process as contemplated under Section 2(f)(iii) of the Central Excise Act, 1994 and as such, they could not considered as inputs and the credit taken on such items is not in accordance with the law and they are not eligible for the CENVAT credit availed to an extent of Rs.1,70,46,634/- was the stand of the Revenue for initiation of these proceedings against the Appellant. It is found that for the earlier period in the Appellant s own case, the Tribunal Chennai has passed an order in M/S. LUK INDIA PRIVATE LIMITED VERSUS THE COMMISSIONER OF GST CENTRAL EXCISE, SALEM 2024 (2) TMI 1018 - CESTAT CHENNAI allowing the Appellant s appeal. The facts being identical, the decision is squarely applicable - It was held in the said case that 'When the department has collected duty on the finished products, the credit availed on the inputs cannot be denied alleging that the activity does not amount to manufacture.' The impugned Order-in-Appeal No. 71/2017 dated 30.11.2017 of the Commissioner of GST and Central Excise, Coimbatore, Circuit Office @Salem, cannot be sustained and so ordered to be set aside - appeal allowed.

Summary

Issues Involved:
1. Non-compliance with the pre-deposit requirement under Section 35F of the Central Excise Act, 1944.
2. Eligibility to avail CENVAT credit on goods without a manufacturing process.
3. Treatment of duty paid on goods cleared as such when no manufacturing activity is involved.

Issue-wise Detailed Analysis:

1. Non-compliance with the Pre-deposit Requirement:

The appeal was initially dismissed by the Commissioner of GST and Central Excise (Appeals), Coimbatore, for non-compliance with the pre-deposit requirement as mandated by Section 35F of the Central Excise Act, 1944. The Tribunal reiterated that the statutory provision requires a pre-deposit to entertain an appeal, as clarified in the Tribunal's decision in AI Champdany Industries Ltd. vs. Commissioner of Central Excise, Kolkata. However, the Appellant argued that the amount of Rs.1,36,92,914/- already paid should be treated as a pre-deposit since it was utilized for duty payment on the same goods for which credit was denied. The Tribunal acknowledged the payment of Rs.20,40,036/- as the pre-deposit, allowing the appeal to be admitted for decision.

2. Eligibility to Avail CENVAT Credit:

The core issue was whether the Appellant could avail CENVAT credit on clutches received from Unit 1 when no manufacturing process was undertaken. The Revenue contended that the activities performed did not amount to manufacture as defined under Section 2(f)(iii) of the Central Excise Act, 1944, and thus, the credit of Rs.1,70,46,634/- was ineligible. The Appellant argued that even if no manufacturing took place, the duty paid on inputs should be treated as reversed under Rule 3(5) of the CENVAT Credit Rules, 2004, as they cleared the goods on payment of duty.

3. Treatment of Duty Paid on Goods Cleared as Such:

The Tribunal considered the Appellant's reliance on various judicial precedents, including Neel Kamal Polytex Industries and Ajinkya Enterprises, which held that when the department accepts duty on finished products, the credit availed on inputs need not be reversed, even if the activity does not constitute manufacture. The Tribunal noted that for the earlier period, a similar issue was decided in favor of the Appellant, wherein the demand was set aside on the grounds that duty paid on finished products suffices for credit reversal.

Conclusion:

The Tribunal concluded that the impugned Order-in-Appeal No. 71/2017 dated 30.11.2017 could not be sustained, as the facts and legal precedents favored the Appellant. The appeal was allowed, setting aside the demand and granting consequential relief as per the law. The Tribunal emphasized that once duty on the finished products is collected, the credit availed on inputs cannot be denied, aligning with established judicial interpretations.