Availability of Cenvat Credit when process not amounting to Manufacture

PJ/Case Laws/2012-13/1095

Case:COMMISSIONER OF CENTRAL EXCISE, INDORE V/S. M.P. TELELINKS LTD

Citation:2004 (178) ELT 167 (TRI-DEL)

Issue:- Cenvat credit on duty paid inputs admissible even if no manufacturing done but cleared after undergoing process-Revenue neutral situation.

Brief Facts:- Respondents manufacture Polyethylene insulated Jelly filled telephone cables. They had procured readymade armoured or unarmored cables as input from various manufacturers and availed Cenvat credit of the duty paid thereon. After subjecting those cables to the process of armouring, jacketing and marking they had cleared the same on payment of duty. The Dy. Commissioner disallowed them Cenvat credit on the ground that the process carried out by them do not amount to manufacture in terms of Section 2(f) of the Central Excise Act since no new excisable commodity distinguished from cable emerged.

In appeal, the Commissioner (Appeals) allowed Cenvat Credit to respondents.

Revenue has filed appeal against Order-in-Appeal.

Appellant’s Contention:- Revenue submitted that the Respondents manufacture Polyethylene insulated Jelly filled telephone cables; that they had procured readymade armoured or unarmored cables as input from various manufacturers and availed Cenvat credit of the duty paid thereon; that after subjecting those cables to the process of armouring, jacketing and marking they had cleared the same on payment of duty; that Dy. Commissioner disallowed them Cenvat credit on the ground that the process carried out by them do not amount to manufacture in terms of Section 2(f) of the Central Excise Act since no new excisable commodity distinguished from cable emerged; that however, on appeal, preferred by the Respondents, the Commissioner (Appeals had allowed them Cenvat credit. She, further, submitted that the product procured by them were clearly described as PIJF telephone cable as armoured or unarmoured; that the same description is mentioned when they had cleared the goods and as such no new product had come into existence; that as the process undertaken by the Respondents did not amount to manufacture they were not eligible to take the Cenvat credit.

Respondent’s Contention:- Respondents submitted that the department had collected the Central Excise duty at the time of clearance of these cables and if the processes undertaken by them do not amount to manufacture the question of levying and collecting any Central Excise duty on the said product does not arise. That if the Department is collecting the duty they will be eligible to avail of Cenvat credit. Respondents alternatively submitted that at the relevant time Rule 57AB(1C) of the Central Excise Rules, 1944 provided that when the inputs on which the Credit has been taken are removed as such from the factory the manufacturer shall pay an amount equal to the duty of Excise which is leviable on such goods; that the Respondents had removed the inputs as such if no process of manufacture, according to the Revenue, had been undertaken on payment of duty.

Reasoning of Judgment:- The Tribunal held that it is not in dispute that Respondents procured PIJF telephone cables on payment of duty of which Credit was taken by them. The second fact which is not disputed by the Revenue is that when the cables were removed by the Respondents after undertaking the process the duty liability was discharged. If the Department levies and collects the Central Excise duty on the goods removed from the factory they cannot claim for the purpose of allowing the Cenvat credit that the process of manufacture had not taken place. If the process of manufacture had not taken place, the question of duty would not arise. The Tribunal also found substantial force in the submission of the appellant that the Credit has been utilized in removing the inputs as such under the provisions of Rule 57AB(1C) of the Central Excise Rules, 1944. In whatever way the matter is looked into it is completely Revenue neutral.

Decision:- Appeal rejected.

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PJ/Case Laws/2012-13/1095

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