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TMI Blog2024 (12) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of duty from Unit-I and CENVAT Credit thereon. The process of slitting of papers in the present case amounts to manufacture since the paper in Unit-II cannot be used in the form it is received from Unit-I because it is required to be slit to the required size to fit into the machines of Unit-II. Further, there is a substantial value addition of raw material and huge investments were made in plant and machinery for slitting and after the process of slitting and cutting is completed, a new and distinct product emerges to which the starting material is not capable of being put or used. It is also found that the Department has never raised any concerns regarding the duty paid on final slit paper. Thus, it is a settled law that once duty on the final products has been accepted by the Department, CENVAT Credit is not deniable even if the activity does not amount to manufacture. CENVAT Credit availed by the appellants in both Unit-I and Unit-II - HELD THAT:- Once the Department has accepted the duty of the final products and has not raised the objection, then in that case, the CENVAT Credit is not deniable even if the activity does not amount to manufacture in view of the various dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 to February 2012 SCN dated 29.10.2012 15.11.2012 Duty demand Rs.33,51,925/- + Rs.42,98,637/- Rs.18,45,899/- Penalty Rs.33,51,925/- + Rs.42,98,637/- Rs.18,45,899/- 2.1 Briefly stated facts of the present case are that the appellants have two manufacturing units close to each other and both have been registered separately under Central Excise Department. Unit-I is engaged in the manufacture of flexible laminated film, flexible laminated pouches paper (slitted rolls) falling under Chapter 39 and Chapter 48 of the First Schedule to the Central Excise Tariff Act, 1985. Unit-II located in the same area manufacturing printed coated laminated paper foil and printed coated paper in roll. The final products manufactured by the appellants are cleared upon payment of appropriate duty of excise leviable. Both units operate under CENVAT Credit scheme and hence avail the credit of duty paid on inputs and capital goods and utilize the same for payment of duty on the final products. Since the paper is one of the inputs, it is procured upon payment of duty in Unit-I and CENVAT Credit is availed thereon. Largely paper is used in Unit-I itself for manufacture of various products, which are clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay duty in respect of unconditionally fully exempted goods in terms of Notification under sub-section (1A) of Section 5(A) of the Central Excise Act, 1944 and he cannot avail the CENVAT Credit on the duty on inputs. 4.1 The learned Counsel for the appellants submits that the process of slitting of paper amounts to manufacture since the paper in Unit-II cannot be used in the form it is received in Unit-I. It is required to be slitted to the required size to fit into the machines of Unit-II. 4.2 He further submits that there was a substantial value addition of raw material and huge investments were made in plant and machinery for slitting. After the process of slitting and cutting is completed, a new and distinct product emerges to which the starting material is not capable of being put or used. 4.3 He further submits that the department has never raised any concerns regarding the duty paid on final slit paper. In terms of Section 2(f) of the Central Excise Act, 1944, the present activity amounts to manufacture specifically with regard to Section 2(f)(i) read with Board s Circular F.No. 4/3/2006-CX dated 19.06.2006. He relies on the decision of Tribunal in the case of Jindal Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE, Jamshedpur vs. Jamshedpur Beverages - 2007 (214) E.L.T. 321 (S.C.) CCE vs. Super Forgings Steels Ltd - 2007 (212) E.L.T. A151 (S.C.) CCE, Vadodara vs. Narmada Chematur Pharmaceuticals Ltd - 2005 (179) E.L.T. 276 (S.C.) MRF Ltd vs. CCE, Hyderabad - 2004 (170) E.L.T. 69 (Tri. Bang.) P.T.C. Industries Ltd vs. CCE, Jaipur-I - 2003 (159) E.L. . 1046 (Tri. Del.) 4.7 The learned Counsel also relies on the decision of Hon ble Gujarat High Court in the case of CCE, Surat-III vs. Creative Enterprises 2009 (235) E.L.T. 785 (Guj.) , wherein the Hon'ble High Court has observed that if the activity does not amount to manufacture, there can be no question of levy of duty, and if duty is levied, MODVAT Credit cannot be denied by holding that there is no manufacture. This decision has been affirmed by the Hon'ble Apex Court reported as 2009 (243) E.L.T. A120 (S.C.) . 4.8 The learned Counsel also relies on the judgment of the Hon'ble Bombay High Court in the case of CCE, Pune vs. Ajinkya Enterprises - 2013 (294) E.L.T. 203 (Bom.) , wherein it has been held that if duty on de-coiled HR/CR coils was paid bona fide , then availing credit of duty paid on HR/CR coils cannot be faulted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litted rolls did not amount to manufacture. 5.1 The learned Counsel for the appellants submits that in fact, both the units are essentially of the same entity and only due to paucity of space, the appellants had to set-up and operate the other unit. The inputs are purchased in Unit-I and majority of the manufacturing is undertaken in Unit-I itself; only to meet additional capacities, certain quantities of inputs (after undergoing certain processes) were sent to Unit-II. Further, Unit-II after carrying distinct processes, transferred back the material to Unit-I. Then Unit-I finally manufactures the ultimate excisable goods and clears it to customers/buyers on payment of appropriate duty. The products which are cleared from Unit-I to Unit-II and from Unit-II to Unit-I are merely intermediate products. 5.2 The learned Counsel relies on the judgment of Hon'ble Apex Court in the case of Escorts Ltd vs. Commissioner of Central Excise, Delhi - 2004 (171) E.L.T. 145 (S.C.) wherein it has been held that in cases where intermediate product comes into existence, even though no duty has been paid on the intermediate product as it is exempted from whole of the duty or is chargeable to nil r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Authorized Representative further submits that the demand of duty of Rs.42,98,637/- under Section 11D of the Central Excise Act, 1944 has rightly been confirmed on the basis of Board s Circular dated 14.01.2011. 6.6 The learned Authorized Representative further submits that the credit of Rs.18,45,899/- is not admissible to Unit-II of the appellants and has rightly been denied in view of the Board s Circular dated 14.01.2011. 7. In reply to the submissions made by the learned Authorized Representative for the Revenue, the learned Counsel for the appellants has further filed their written submissions controverting the written submissions filed by the Revenue regarding the applicability of the decision of the Hon ble Supreme Court in the case of CCE, New Delhi-I vs. S.R. Tissues Pvt Ltd (supra). The learned Counsel has tried to distinguish the decision of CCE, New Delhi-I vs. S.R. Tissues Pvt Ltd (supra) with the facts of the present case as well as the decision of the Hon ble Apex Court settled subsequently after the decision of CCE, New Delhi-I vs. S.R. Tissues Pvt Ltd (supra). He has also tried to distinguish the facts of the present appeals with CCE, New Delhi-I vs. S.R. Ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant s activity of slitting/cutting jumbo paper rolls into small paper rolls amounts to manufacture or not? As per the Department, the activity carried out by the appellants in Unit-I does not amount to manufacture and therefore the CENVAT Credit availed by the appellants in Unit-I is not sustainable in law. Further, as per the Department, the CENVAT Credit availed by the appellants in Unit-II is also not sustainable in law. Further, as per the Department, the appellant is liable to pay Rs.42,98,637/- under Section 11D of the Central Excise Act, 1944 on the ground that the same has been collected from the buyers by wrongly represented the same as duty of excise. 10. We find that in this case, two units under the same management are involved and there is no dispute regarding the use of paper within Unit-I for slitting, lamination, printing and heat-sealing coating. Similarly, there is no dispute regarding process undertaken at Unit-II with regard to slitted paper and payment of duty thereon. Further, there is no dispute regarding process of heat-sealing coating at Unit-I after receipt from Unit-II, payment of duty from Unit-I and CENVAT Credit thereon. 11. Further, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled this issue. It is pertinent to reproduce the findings given in para 7, 8 9 of the decision of the Tribunal in the case of CGST vs. M/s Ashok Paper Products (supra), which are extracted hereunder: 7. In CCE, Mumbai vs. Fitrite Packers as reported in 2015 (324) ELT 625 (SC), it has been held that- 9. On the basis of aforesaid discussion and formulation of certain tests to ascertain whether a particular process would amount to manufacture or not, the Court culled out four categories of cases in its conclusion in para 27 of the judgment. We reproduce these categories hereunder : 27. The case law discussed above falls into four neat categories. (1) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category. (2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process. (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs by themselves without the processes of drilling, trimming and chamfering. It was in this situation that the test laid down was that if by adopting a particular process a transformation takes place which makes the product have a character and use of its own which it did not bear earlier, then such process would amount to manufacture irrespective of whether there was a single process or several processes. 8. The type of activity undertaken by the respondent-assessee would amount to manufacture and Central Excise duty was required to be paid on the clearance of paper napkin, paper towel, etc. manufactured by it from Jumbo roll after packing / repacking of the same in the consumer packs. 9. This view was also taken by a Division Bench of the Tribunal in Final Order No. 52243-52244 /2018 dated 18 June, 2018 in M/s. S R Protus Hygiene P Ltd. vs. CCE Delhi I. The relevant extract of the above order is reproduced below: 12. The raw materials procured by the appellant are in the form of jumbo rolls. Such jumbo rolls cannot be conveniently and efficiently used either as a tissue paper, napkin, toilet roll, kitchen roll etc. The sheer size of the jumbo rolls makes them impractical for dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant are amounting to manufacture, we do not propose to discuss the submissions advanced to the effect that the case of the appellant will not fall under Section2(f)(iii) read with the Third Schedule of the Central Excise Tariff Act. In view of these decisions of Hon ble Apex Court as well as decision of the Tribunal (cited above) , we are of the considered view that the process of slitting/cutting amounts to manufacture and the appellants have rightly paid the duty and taken the CENVAT Credit in Unit-I, and for Unit-II also, CENVAT Credit on the duty paid to Unit-I was taken rightly. 16. Further, we hold that once the Department has accepted the duty of the final products and has not raised the objection, then in that case, the CENVAT Credit is not deniable even if the activity does not amount to manufacture in view of the various decisions relied upon the appellants. 17. Further, we find that the first condition to invoke Section 11D of the Central Excise Act, 1944 by the Department to demand is not applicable in present case because Section 11D is applicable on the person who is liable to pay duty under Central Excise Act, 1944, whereas in the present case, in the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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