2023 (5) TMI 430 - AT - Central Excise

Tribunal Overturns Disallowance of Cenvat Credit

M/s. KLT Automotive & Tubular Products Ltd Versus Commissioner of Central Excise, Thane - II

The Tribunal allowed the appeal, setting aside the disallowance and recovery of inadmissible Cenvat credit, recovery of interest, and imposition of ... Process amounting to manufacture or not - Recovery of inadmissible Cenvat credit - GP Sheets Cut Length - case of Revenue is that process carried out by them was mere cutting of length of GP coils and the same were not amounting to manufacture as per the provisions of Section 2(f) of the Central Excise Act, 1944 - HELD THAT:- The order of the Commissioner of Central Excise, Raigad which was the basis for making the demand against the appellant in the case of COLOUR ROOF (INDIA) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD [2014 (7) TMI 523 - CESTAT MUMBAI] has been set aside by the Tribunal where it was held that there is definitely some value addition involved as the goods in question have been removed at a higher rate of duty resulting into additional duty to the exchequer of Rs. 50.40 lakhs. Since the appeal has been allowed in the case of M/s. Colour Roof (India) Ltd., the impugned order can be set aside for this reason itself. Hon’ble Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-III VERSUS NAHAR GRANITIES LTD. [2014 (5) TMI 57 - GUJARAT HIGH COURT] where reliance placed in the case of COLLECTOR OF CENTRAL EXCISE, PATNA VERSUS TATA IRON & STEEL CO. LTD. [2004 (2) TMI 68 - SUPREME COURT], where the question of dutiability of such product came up before the Supreme Court on the ground that such product was a mere byproduct of the manufacturing activity. It was held that no excise duty would be leviable on Zinc Dross. It was observed that merely because the assessee was selling the said by-product, would not mean that the same was a marketable commodity. In short, the Supreme Court held that there was no excise duty liability on the sale of Zinc Dross. There are no merit in the impugned order and the same is set aside - appeal allowed. Issues Involved:1. Disallowance and recovery of inadmissible Cenvat credit.2. Recovery of interest on inadmissible Cenvat credit.3. Imposition of penalty equal to the duty amount.Detailed Analysis:1. Disallowance and Recovery of Inadmissible Cenvat Credit:The Commissioner of Central Excise, Thane-II, disallowed and ordered the recovery of Cenvat credit amounting to Rs. 71,49,505/- availed on 'GP Sheets Cut Length' by the appellant during March 2010. The basis for this disallowance was that the process carried out by the supplier, M/s. Colour Roof (India) Ltd., was mere cutting of GP coils, which did not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. Consequently, the duty paid on these inputs was not considered excise duty, making the Cenvat credit inadmissible.The appellant argued that the Tribunal had already set aside the order against M/s. Colour Roof (India) Ltd. [2014 (305) ELT 129 (Tri.-Mumbai)], invalidating the basis for the demand. Additionally, they cited the Gujarat High Court's decision in Nahar Granites Ltd. [2014 (305) ELT 9 (Guj.)], which held that Cenvat credit by the recipient cannot be challenged if the manufacturer was not required to pay duty due to exemption.The Tribunal observed that the issue against M/s. Colour Roof (India) Ltd. had been settled, and the demand against the appellant could not survive. The Tribunal referenced the Gujarat High Court's decision, which supported the appellant's stance that Cenvat credit could not be denied based on the supplier's duty payment status.2. Recovery of Interest:The Commissioner ordered the recovery of interest on the inadmissible Cenvat credit under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11AB of the Central Excise Act, 1944. The Tribunal, however, noted that since the primary demand for Cenvat credit disallowance was invalid, the consequential recovery of interest also could not be sustained.3. Imposition of Penalty:A penalty equal to the duty amount of Rs. 71,49,505/- was imposed under Rule 15 of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944. The Tribunal found that the imposition of penalty was unjustified as the foundational demand for disallowance of Cenvat credit was set aside. The Tribunal emphasized that the appellant's actions were in line with the legal provisions and supported by judicial precedents.Conclusion:The Tribunal allowed the appeal, setting aside the impugned order, including the disallowance and recovery of Cenvat credit, the recovery of interest, and the imposition of penalty. The Tribunal's decision was based on the settled issue in the case of M/s. Colour Roof (India) Ltd. and the supportive judicial precedents, ensuring that the appellant's entitlement to Cenvat credit remained intact.