2015 (2) TMI 1076 - AT - Central Excise

Tribunal allows cenvat credit on conversion process, waives duty demand, interest, penalty

The Tribunal ruled in favor of the appellant, holding that the process of converting M.S. Sheets into M.S. Profiles constituted manufacturing, entitling ... Waiver of pre deposit - CENVAT Credit - Manufacture - appellant were clearing M.S. Profiles on payment of duty and were availing cenvat credit of central excise duty paid on M.S. Sheets - Held that:- Tribunal in the two orders in the cases of Sanjay Industrial Corporation (2003 (3) TMI 170 - CEGAT, MUMBAI) and Pioneer Profile Industries (2005 (12) TMI 420 - CESTAT, NEW DELHI) has held that the process of profile cutting of M.S. Plates and M.S. Sheets as per the design and drawings of the customer to make M.S. Profiles, Circles, Angles, etc. amounts to manufacture. Moreover, even if the Departments contention that the process undertaken by the appellant does not amount to manufacture is accepted, since admittedly the appellant have cleared the M.S. Profiles on payment of duty and the duty paid is more than the cenvat credit availed, the cenvat credit allegedly wrongly taken stands reversed and hence, there is absolutely no justification for demanding the allegedly wrongly taken cenvat credit once again. Rule 3(5) of the Cenvat Credit Rules, 2005 permits the clearance of the inputs as such on payment of an amount equal to the cenvat credit availed and if the Departments stand that the process does not amount to manufacture is accepted, the appellants activity would amount to clearing the cenvat credit availed inputs as such on payment of an amount which admittedly is not less than the cenvat credit availed. In view of the above, the impugned order is not correct and the appellant have strong case in their favour. Hence, the requirement of pre-deposit of duty demand, interest and penalty is waived for hearing of the appeals and recovery thereof is stayed - Stay granted. Issues:1. Entitlement to cenvat credit for the process of converting M.S. Sheets into M.S. Profiles.2. Justification for demanding allegedly wrongly taken cenvat credit.3. Waiver of pre-deposit of duty demand, interest, and penalty.Analysis:Issue 1: Entitlement to cenvat credit for the process of converting M.S. Sheets into M.S. ProfilesThe appellant received M.S. Sheets and processed them into various shapes and sizes, such as M.S. Profiles, through cutting, tapping, milling, boring, etc. The Department contended that this process did not amount to manufacture, challenging the appellant's entitlement to cenvat credit on M.S. Sheets. The Commissioner's order confirmed demands for cenvat credit along with interest and penalties. The appellant argued that the process of converting M.S. Sheets into M.S. Profiles constitutes manufacturing, citing precedents where similar activities were deemed as manufacturing. They maintained that duty was correctly paid on the Profiles, and any allegedly wrongly taken cenvat credit was reversed due to the duty paid exceeding the cenvat credit availed. The Tribunal agreed with the appellant, emphasizing that even if the Department's stance was accepted, the duty paid exceeded the cenvat credit availed, nullifying the justification for demanding the allegedly wrongly taken cenvat credit.Issue 2: Justification for demanding allegedly wrongly taken cenvat creditThe Tribunal referenced Rule 3(5) of the Cenvat Credit Rules, 2005, which permits clearing inputs on payment equal to the cenvat credit availed. In this case, since the duty paid by the appellant exceeded the cenvat credit availed, the allegedly wrongly taken cenvat credit was considered reversed. Therefore, there was no basis for demanding the cenvat credit again. The Tribunal highlighted that the appellant's activity could be viewed as clearing the cenvat credit availed inputs on payment exceeding the cenvat credit availed, further supporting the appellant's position. Consequently, the impugned order demanding the allegedly wrongly taken cenvat credit was deemed incorrect.Issue 3: Waiver of pre-deposit of duty demand, interest, and penaltyConsidering the appellant's strong case in their favor and the reversal of allegedly wrongly taken cenvat credit due to duty payment exceeding cenvat credit availed, the Tribunal waived the requirement for pre-deposit of duty demand, interest, and penalty for hearing the appeals. The Tribunal allowed the stay applications, acknowledging the appellant's prima facie case and the lack of justification for demanding the allegedly wrongly taken cenvat credit again.