Cenvat credit availed need not be reversed even if the activity does not amount to manufacture

PJ/Case Laws/2012-13/1294

Case:- IVP LTD Vs COMMISSIONER OF CENTRAL EXCISE, THANE-II

Citation:- 2012-TIOL-1505-CESTAT-MUM

Issue:- Cenvat credit availed need not be reversed even if the activity does not amount to manufacture.

Brief Facts:- Department issued show cause notice for denial of cenvat credit to the assessee on the ground that the process undertaken by them of sorting and repacking does not amount to manufacture under section 2(f) of the Central Excise Act, 1944 and therefore they are not entitled for availing cenvat credit. But, assessee has paid higher amount of duty than the credit taken on the process undertaken by them. The Department denied the credit and confirmed the demand along with interest and penalty. The appeal filed by the appellant before the lower appellant authority was rejected. Hence, the present appeal.

Appellant Contentions:- The Appellant Relied on following cases:

· Commissioner of Central Excise. Pune-III vs. Ajinkya Enterprises & Ors.
· Commissioner of Central Excise & Customs. Surat-III vs. Creative Enterprises.

As per above judgments if the Assessee has paid higher duty on the cleared goods after undertaking certain process and the same has been accepted by the department, the department can not demand reversal of CENVAT credit taken on the ground that the process involved does not amount to manufacture.

Respondent Contentions:- The Respondent reiterates the findings of the lower authorities but fairly concedes that in view of the decisions of the High Court of Bombay and Gujarat, the issue is settled in favour of the appellant.

Reasoning of Judgment:- We have considered arguments on both the sides. The decision given by the High court in case of Ajinkya Enterprises was discussed in length wherein it was held that the assessment on decoiled HR/CR coils cleared from the factory of the assessee on payment of duty has neither been reversed nor it is held that the assessee is entitled to refund of duty paid at the time of clearing the decoiled HR/CR coils. Further, decision of Ashok Enterprises, Super Forgings, S.A.I.L., M.P. Telelinks Limited and Creative Enterprises was followed wherein it has been held that once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity does not amount to manufacture. The Apex Court has also followed the same view by dismissing the SLP filed by the Revenue and upholding the decision of Gujarat high court in case of Creative Enterprises. Ratio of these decisions squarely applies to the facts of this case. Respectfully following these decisions, the appeal was allowed with consequential relief and the stay application is also disposed of.

Decision: - Appeal allowed.

Comment: This is yet another decision confirming the analogy that Cenvat Credit is admissible when there is no doubt regarding the receipt and use of inputs in the process and also the fact that inputs are duty paid even where subsequently the process is not held to be that which amounts to manufacture of final products under section 2 (f) of the Central Excise Act, 1944.

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PJ/Case Laws/2012-13/1294

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