Tribunal grants Cenvat credit on slitting activity of kraft paper, deeming it as not availed.

The Tribunal allowed the appeal, setting aside the impugned order that denied Cenvat credit on the slitting activity of kraft paper. It was determined that once the Cenvat credit availed was reversed during the payment of central excise duty upon clearance of the slit kraft paper, it was deemed as not availed from the beginning. As there was no dispute regarding the payment of duty during clearance by debiting the Cenvat credit account, the Tribunal found the denial of Cenvat credit unjustified and ruled in favor of the appellant.

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Issues: Appeal against denial of Cenvat credit on slitting activity of kraft paper.

Analysis:
The appeal involved a dispute regarding the slitting activity on kraft paper carried out by the appellant, who was engaged in the manufacture of aluminum/copper products. The appellant received kraft paper in jumbo rolls, and after slitting these rolls, the resultant goods were cleared by paying central excise duty using the Cenvat credit availed on the raw materials. The department contended that slitting did not amount to manufacturing, leading to a show cause notice being issued, denying the Cenvat credits availed on the jumbo rolls of kraft paper. The appellant challenged this decision through the present appeal.

During the hearing, the appellant's counsel argued that excise duty was paid at the time of clearance of the slit kraft paper, regardless of whether slitting constituted manufacturing. The counsel highlighted that the Cenvat credit availed had already been reversed by debiting it for payment of excise duty on the cleared slit kraft paper. Additionally, the counsel pointed out that the excise duty paid during clearance exceeded the Cenvat credit availed, resulting in a cash payment of duty as well.

On the other hand, the learned DR representing the Revenue supported the impugned order denying the Cenvat credit availed on the slitting activity of kraft paper. After considering the arguments from both sides and examining the records, the Tribunal observed that the dispute primarily revolved around the question of whether slitting constituted manufacturing. However, it was noted that the entire Cenvat credit availed had already been reversed during the payment of central excise duty upon clearance of the slit kraft paper.

The Tribunal relied on legal precedents, including a Supreme Court case and decisions from High Courts, to establish that once Cenvat credit availed is reversed, even at a later date, it is deemed as not availed from the beginning. Given that there was no dispute regarding the payment of duty during the clearance of the slit kraft paper by debiting the Cenvat credit account, the Tribunal concluded that the impugned order was unjustified. Consequently, the appeal was allowed, and the impugned order was set aside in favor of the appellant.

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