Appellant's Process Not Manufacturing: CENVAT Credit Rules

M/s. Trimex Sands Pvt. Ltd Versus CCE, Visakhapatnam-I

M/s. Trimex Sands Pvt. Ltd Versus CCE, Visakhapatnam-I - TMI Issues Involved:
1. Whether the process carried out by the appellants results in the manufacture of an excisable product.
2. If there is no manufacturing involved, whether CENVAT Credit already utilized for payment of duty on final products can be denied or required to be reversed.
3. Whether the credit lying in balance will lapse after such payment of duty through CENVAT account.

Issue-Wise Detailed Analysis:

1. Whether the process carried out by the appellants results in the manufacture of an excisable product:

The appellant is involved in separating valuable mineral sands from ordinary sea sand, resulting in products like rutile concentrate, ilmenite concentrate, zircon concentrate/semi concentrate, garnet concentrate, and silimanite concentrate. The process includes feed preparation, pre-concentration, and mineral separation stages. The adjudicating authority concluded that the chemical structure of the minerals remained unchanged, and there was no crystallographic transformation, thus the process does not amount to manufacture. This conclusion aligns with the Tribunal's decision in Indian Rare Earths Ltd. v. CCE [2002(139) ELT 352 (Tri.)], which held that similar processes did not constitute manufacturing. The Tribunal reiterated this stance in Kerala Minerals & Metals Ltd. v. CCE Kochi [2007 (214) ELT 556 (Tri-Bang)], confirming that mere separation of minerals from beach sand does not result in a new product.

2. If there is no manufacturing involved, whether CENVAT Credit already utilized for payment of duty on final products can be denied or required to be reversed:

The appellant had availed CENVAT Credit on inputs, capital goods, and input services and utilized it for payment of duty on both domestic and export clearances. The adjudicating authority acknowledged that once the duty on the final product is accepted by the Department, CENVAT Credit cannot be reversed even if the activity does not amount to manufacture. This is supported by numerous judgments, and the authority conceded that the CENVAT credit of Rs. 4,59,05,807/- availed and utilized by the appellant is not recoverable. However, this aspect was not explicitly mentioned in the order portion due to oversight.

3. Whether the credit lying in balance will lapse after such payment of duty through CENVAT account:

The appellant argued that the utilization of CENVAT Credit was not questioned by the department and that there is no provision in law for the lapsing of credit applicable to their case. However, the adjudicating authority and the Tribunal found this contention incorrect. According to Rule 11(3) of the CENVAT Credit Rules 2004, if a final product is exempted from duty, the unutilized credit must lapse and cannot be used for any further payment of duty. The Board's circular no 911/01/2010CX dated 14/01/2010 also supports this position. Therefore, the order holding that the CENVAT credit of Rs. 1,41,58,285/- lying in balance should lapse is correct in law.

Conclusion:

The Tribunal concluded that the appellant's activity during the relevant period does not amount to manufacture. The CENVAT credit utilized for payment of duty on domestic and export clearances is not recoverable. However, the unutilized credit lying in balance as on 31-03-2011 must lapse. The penalty of Rs. 2000/- imposed by the adjudicating authority was set aside. The appeal was partly allowed on these terms.