Cutting and slitting HR/CR coils into sheets not manufacturing; appellants not liable under Section 11D, appeal allowed

CESTAT, Kolkata held that cutting and slitting of HR/CR coils into sheets does not amount to manufacture; therefore the appellants are not manufacturers and not liable to pay Excise duty under Section 11D. As the appellants had paid more duty than the credit taken, the impugned demand in respect of the credit is unsustainable. The demand under Section 11D could not be raised against the appellants and the appeal was allowed.

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Issues:
1. Whether cutting and slitting of HR/CR Coils into sheets amounts to manufacture.
2. Whether the appellants are liable to pay duty on the sheets.
3. Whether the appellants are required to pay any amount against irregularly availed credit.
4. Applicability of Section 11D in the given scenario.

Analysis:
1. The appellants received HR/CR Coils of iron and steel, cut and slit them into sheets for M/s. SAIL's customers. The Board's circular clarified that such activity does not amount to manufacture, as per the Delhi High Court's order upheld by the Supreme Court. The appellants continued taking credit and paying duty on the sheets due to ignorance of the circular during the impugned period.

2. The consultant for the appellants argued that since duty paid on the sheets exceeded the credit taken, no additional payment was necessary. Citing legal precedents, including the Narmada Chematur Pharmaceuticals Ltd. case and the Shree Krishna Industries case, it was contended that when duty paid equals credit taken, there is no revenue implication, and Section 11D does not apply if the process is not considered manufacturing.

3. The Tribunal found merit in the consultant's argument, noting that the appellants had paid more duty than the credit availed. Consequently, the demand for payment against the credit taken was deemed unsustainable. Moreover, since Section 11D pertains to those liable to pay excise duty, and the appellants were not considered manufacturers due to the non-manufacturing process, no demand could be raised against them under Section 11D.

4. Considering the legal principles and the appellants' situation, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellants. The decision highlighted that the appellants were not manufacturers and thus not obligated to pay excise duty, ultimately absolving them from the demand raised under Section 11D.

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