Cenvat credit neutralisation and manufacture dispute supported waiver of pre-deposit and stay of recovery

Profile cutting of M.S. sheets and plates into profiles, circles, angles and similar products was treated in earlier Tribunal rulings as manufacture, supporting the assessee's prima facie case against the duty demand. Even on the department's alternative view that the activity was not manufacture, the credit dispute was neutralised because the goods were cleared on payment of duty exceeding the credit availed, and Rule 3(5) of the Cenvat Credit Rules, 2005 supports payment of an amount equal to the credit when inputs are cleared as such. On that basis, the Tribunal waived pre-deposit of the confirmed duty, interest and penalty and stayed recovery.

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Issues: Whether pre-deposit of the confirmed duty demand, interest and penalty should be waived and recovery stayed.

Analysis: The process of profile cutting of M.S. sheets and plates to make M.S. profiles, circles, angles and similar products had already been held by the Tribunal in earlier decisions to amount to manufacture. Even on the department's own case that the activity did not amount to manufacture, the appellant had cleared the profiles on payment of duty and the duty paid exceeded the credit availed, so the allegedly wrongly taken credit stood neutralised. Rule 3(5) of the Cenvat Credit Rules, 2005 also supported the view that clearance of inputs as such on payment of an amount equal to the credit availed did not warrant a further demand of the same credit.

Conclusion: The appellant had a strong prima facie case, so pre-deposit was waived and recovery was stayed.

Ratio Decidendi: Where the assessee establishes a strong prima facie case and the disputed credit is neutralised by payment of duty or by reversal equivalent to the credit availed, pre-deposit and recovery may be waived.

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