Whether credit reversal required if activity is held as not amounting to manufacture?

PJ/CASE-LAW/2015-16/2746

Case-R.B. STEEL SERVICES VERSUS COMMR. OF C. EX. & S.T., ROHTAK

Citation- 2015 (318) E.L.T. 139 (Tri. - Del.)

Brief Facts-The brief facts of the case are that the stay application along with appeal has been filed against Order-in-Original No. 50/CE/Comm/DM/RTK/ 2013-14, dated 30-9-2013 in terms of which the adjudicating authority held that converting black rods/bars into bright bars did not amount to manufacture during the relevant period (May 2003-April 2004) and therefore, the Cenvat credit taken on capital goods/black rods/bars used for making bright bars was not admissible. As a consequence the adjudicating authority disallowed the Cenvat credit of Rs. 68,24,147/- and ordered recovery of the same alongwith interest and also imposed mandatory penalty of Rs. 68,24,147/-. It is also seen out of total demand of Rs. 68,24,147/-, demand of Rs. 67,72,047/- relates to the credit taken on the inputs and demand of Rs. 52,100/- relates to the credit taken on capital goods.

Appellants Contention- The appellants have contended that their process amounted to manufacture, they had been paying duty on their product namely bright bars and the total duty paid by them is more than the amount of credit taken. In this scenario, they contended that the question of wilful mis-statement/suppression of facts with intent to evade payment of duty simply would not arise. They also cited a large number of judgments to the effect that if the duty has been paid on the final product which is more than the amount of credit taken then the question of reversal of the Cenvat credit taken on the ground that the process did not amount to manufacture would not arise.
The contention of the learned Counsel is that the appellants has processed the inputs and the same has been cleared on payment of duty therefore, if their activity is to be held as amounts to manufacture, the duty paid for clearance may be treated as reversal of Cenvat credit in the light of the decision of this Tribunal in the case of Ajinkya Enterprises -2013 (288)E.L.T.247 (T) = 2011-TIOI.-1333-CESTAT-MUMwhich has been affirmed by the High Court of Bombay in 2013 (294)E.L.T.203 (Bom.) = 2012-TIOL-578-HC-MUM-CX.”

Respondents Contention-The respondent reiterated the findings of the lower adjudicating authority.

Reasoning Of Judgement-The tribunal have considered the submissions and as the issue is covered by various judicial pronouncements, with the consent of the ld. AR, proceed to decide the appeal itself waiving the requirement of pre-deposit. That the process of conversion of black bars/rods into bright bars does not amount to manufacture was declared by the Hon’ble Supreme Court in the case of Vee Kayan Industriesv. Collector of CE, Chandigarh- 1996 (83)E.L.T.262 (S.C.). It was also followed by CESTAT in the case of Geeta Bright Bar Works Pvt. Ltd.v. CCE, Mumbai-V-2012 (277)E.L.T.67 (Tri. - Mumbai). Thus it is pointless to indulge in any discussion regarding the contention of the appellants that their process amounted to manufacture as the issue is no longer res integra for the relevant period. It is seen that in the case of Super Forgings and Steels Ltd. v. CCE, Chennai- 2007 (217)E.L.T.559 (Tri.-Chennai), CESTAT held that there is no question of recovery of Cenvat credit which has been utilized towards payment of duty of the final products even when the process did not amount to manufacture. In the case of CCE, Indorev. M.P. Telelinks Ltd.- 2004 (178)E.L.T.167 (Tri.-Del.)CESTAT held that if the department levies and collects the Central Excise duty on the goods remove from the factory, they cannot claim for the purpose of allowing Cenvat credit that the process of manufacture had not taken place. Similar view was held by CESTAT in the case of CCE, J&K Jammuv. North Sun Enterprises Industrial Estate - 2012 (284)E.L.T.75 (Tri.-Del.). Recently CESTAT in the case of Plyrub Extrusions (I) Pvt. Ltd.v. CCE, Belapur - 2014-TIOL-1867-CESTAT-MUM has held as under :

“3. The contention of the learned Counsel is that the appellants has processed the inputs and the same has been cleared on payment of duty therefore, if their activity is to be held as amounts to manufacture, the duty paid for clearance may be treated as reversal of Cenvat credit in the light of the decision of this Tribunal in the case of Ajinkya Enterprises -2013 (288)E.L.T.247 (T) = 2011-TIOI.-1333-CESTAT-MUM which has been affirmed by the High Court of Bombay in 2013 (294)E.L.T.203 (Bom.) = 2012-TIOL-578-HC-MUM-CX.”

As the issue is no longer res integra in the light of this Tribunal in the case of Ajinkya Enterprises(supra) which has been affirmed by the Hon’ble Bombay High Court therefore, we hold that the appellant is entitled for Cenvat credit. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief, if any. In the light of the foregoing, the appeal is allowed.

Decision:- Appeal allowed.

Comment:- The gist of the case is that if the amount of duty paid on the final product is more than that of credit taken and if the department is collecting and levying excise duty at the time of removal then the question of reversal of cenvat credit on the ground that the process does not amount to manufacture would not arise. This was base on the landmark decision in the case ofAjinkya Enterprises affirmed by Bombay High Court.

Prepared By:- Neelam Jain

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