2015 (1) TMI 1101 - AT - Central Excise

Tribunal allows appeal for cenvat credit on central excise duty for manufacturing PU foam.

The Tribunal allowed the appeal in favor of the appellant, a central excise registered unit, regarding the eligibility to avail cenvat credit on central ... Manufacture - cenvat credit on inputs - classification and change in character of goods - acceptance of duty by Revenue and its effect on credit - precedential weight of departmental and judicial acceptance of classificationManufacture - cenvat credit on inputs - classification and change in character of goods - acceptance of duty by Revenue and its effect on credit - Whether the appellant is eligible to avail cenvat credit of central excise duty paid on P.U. foam blocks used as inputs for manufacture of P.U. foam sheets - HELD THAT: - The Tribunal found on the record that the appellant procured P.U. foam blocks (classified under Chapter Heading No. 3920/3921) and produced articles classified under Chapter Heading No. 3926, on which central excise duty was discharged and accepted by the Revenue. The unchanged classification adopted by the appellant for its final product and the Revenue's acceptance of duty on that product indicate that the original input has undergone a change and become a different product. The Tribunal applied the settled principle that when duty has been collected on a product treated as manufactured by the assessee and accepted by the department, cenvat credit on inputs consumed in producing that final product cannot be denied. The Tribunal considered and preferred the ratios in Creative Enterprises (as affirmed by the Supreme Court) and Ajinkya Enterprises as directly on point and more persuasive than decisions relied upon by the department to the contrary. On these grounds, the Tribunal concluded that the appellant was rightly entitled to avail the cenvat credit of duty paid on the inputs. [Paras 7, 8, 9, 11, 12]Appellant entitled to avail cenvat credit on central excise duty paid on P.U. foam blocks used in manufacture of the P.U. foam sheets; impugned order set aside and appeal allowed.Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order and held that where the final product was classified and duty accepted by the Revenue, the appellant was entitled to avail cenvat credit on duty paid on the inputs. Issues involved:Whether the appellant is eligible to avail cenvat credit of central excise duty paid on P.U. foam blocks used as inputs for their final product described as P.U. foam sheet.Analysis:The appeal was filed against an Order-in-Appeal where the appellant, a central excise registered unit, manufactured P.U. form sheets and availed cenvat credit. The lower authorities contended that the appellant's activity did not amount to manufacturing, leading to a show cause notice for demand confirmation, interest, and penalty imposition. The adjudicating authority upheld the demand and penalty. The appellant appealed, but the first appellate authority rejected it. The appellant argued that they paid central excise duty on the articles manufactured from P.U. foam blocks, making cenvat credit valid. They cited court decisions supporting their position. The departmental representative argued that cutting P.U. foam blocks did not constitute manufacturing, referring to relevant court decisions.The Tribunal considered the submissions and records, focusing on whether the appellant could claim cenvat credit on central excise duty paid for P.U. foam blocks used in manufacturing P.U. foam sheets. It was noted that the appellant procured P.U. foam blocks on which duty was paid and classified the final products under a different heading after manufacturing. The classification remained unchanged throughout the proceedings, indicating a transformation of the original input. The Tribunal concluded that since the appellant paid duty on the final products and the Revenue accepted it, the appellant was entitled to cenvat credit, in line with established law.The Tribunal agreed with the appellant's reliance on court decisions supporting their position, emphasizing that once an assessee considers an activity as manufacturing and pays duty accordingly, denying cenvat credit on the basis of no manufacturing activity is unfounded. The Tribunal found the judgments cited by the departmental representative less persuasive compared to those supporting the appellant's case. Consequently, the impugned order was deemed unsustainable and set aside, allowing the appeal in favor of the appellant.