2017 (11) TMI 601 - AT - Central Excise

Tribunal grants Cenvat credit on frames, reduces penalty

The Tribunal ruled in favor of the appellant, setting aside the denial of Cenvat credit on frames under Rule 14 of the Cenvat Credit Rules, 2004. The ... CENVAT credit - receipt of assembly frame - manufacture - denial on the ground that after receipt, appellant have carried out only painting process and such activity does not amount to manufacture in terms of Section 2(f) accordingly, appellant is not entitle for the Cenvat credit on the duty paid goods received by them - Held that: - the Cenvat credit in respect of duty paid goods is allowed when the said duty paid goods is brought into factory for the purpose of remaking, refine, reconditioning or for any other reason. In the present case admittedly duty paid goods brought by the appellant has undergone the painting process. As per the provision of Rule 16(2) assesse is supposed to discharge excise duty equivalent to Cenvat credit availed in case of process does not amount to manufacture and excise duty payable on the transaction value in case activity amounts to manufacture. As per this provision whether activity on the duty paid goods brought into factory is manufacture of otherwise, the duty paid goods to be treated as input and credit is allowed - demand set aside. Reliance also placed in the case of Commissioner of Central Excise & Customs, Aurangabad Versus M/s Fine Packaging Pvt Ltd [2016 (3) TMI 801 - CESTAT MUMBAI]. As regard the demand of ₹ 8,43,320/- appellant have admitted the same therefore demand of ₹ 8,43,320/- along with interest is upheld. Appeal allowed in part. Issues:1. Denial of Cenvat credit on frames2. Recovery of interest and penalty3. Short payment of Central Excise dutyAnalysis:Issue 1: Denial of Cenvat credit on framesThe appellant, engaged in manufacturing load bodies and painting assembly frames, faced denial of Cenvat credit by the Commissioner of Central Excise. The Commissioner disallowed the credit on frames, confirming a demand of Rs. 42,15,215 under Rule 14 of the Cenvat Credit Rules, 2004. The department contended that painting frames did not constitute manufacturing under the Central Excise Act, 1944, thus, the credit was not permissible. The appellant argued that the activity of converting semi-finished goods into finished goods constituted manufacturing under Note 6 of Section XVII of the Central Excise Tariff Act, 1984. They also highlighted Rule 16 of the Central Excise Rules, 2002, allowing credit on goods brought to the factory for re-making or re-conditioning. The Tribunal, citing precedent judgments, ruled in favor of the appellant, setting aside the demand for Cenvat credit and associated interest and penalty.Issue 2: Recovery of interest and penaltyThe order also included the recovery of interest and penalty. While the demand of Rs. 8,43,320 for short payment of Central Excise duty was acknowledged by the appellant, they sought a reduction in the penalty to 25% as per the proviso to Section 11AC, citing a lack of extension of this option by the adjudicating authority. The Tribunal upheld the demand for duty and interest but reduced the penalty to 25% of the amount, following the Supreme Court's ruling in Commissioner of C. Ex. & Customs Vs. R.A. Shaikh, Paper Mills Pvt Ltd. The appellant was granted one month to pay the reduced penalty.Issue 3: Short payment of Central Excise dutyThe case involved a short payment of Central Excise duty amounting to Rs. 8,43,320, which the appellant accepted. However, they contested the penalty amount, seeking a reduction to 25% as per legal provisions. The Tribunal upheld the duty payment but reduced the penalty to 25% of the original amount, allowing the appellant to pay the reduced penalty within one month. The judgment was pronounced on 31/10/2017 by the Tribunal.