Cutting plates to size is not manufacture and triggers Cenvat credit reversal on clearance as such

Cutting plates to size does not create a new, distinct product with a separate name, character or use, so the process is not manufacture. On that reasoning, the cut plates are treated as inputs cleared as such, and reversal or payment equal to the Cenvat credit taken is required under Rule 3(4) of the Cenvat Credit Rules, 2002. The note states that clearance after cutting is therefore subject to the credit reversal mechanism because no manufactured product emerges.

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Issues: (i) Whether cutting of plates to size amounts to manufacture or is a clearance of inputs as such, attracting reversal of Cenvat credit under Rule 3(4) of the Cenvat Credit Rules, 2002.

Issue (i): Whether cutting of plates to size amounts to manufacture or is a clearance of inputs as such, attracting reversal of Cenvat credit under Rule 3(4) of the Cenvat Credit Rules, 2002.

Analysis: The process of cutting or slitting material to specific sizes does not bring into existence a new, different and distinct article having a separate name, character and use. On that basis, the activity undertaken did not amount to manufacture. Once the process was not manufacture, the goods cleared after cutting had to be treated as inputs removed as such, requiring payment equal to the credit taken.

Conclusion: The clearance was rightly treated as removal of inputs as such and the demand under Rule 3(4) of the Cenvat Credit Rules, 2002 was sustainable.

Final Conclusion: The appeal failed on merits and the demand was upheld.

Ratio Decidendi: Cutting of plates to size, without emergence of a new, distinct and different product, does not amount to manufacture and therefore attracts reversal of Cenvat credit on clearance as such.

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