Flux cored wire drawing/re-drawing process constitutes manufacture under Section 2(f) Central Excise Act 1944

The CESTAT Ahmedabad held that the appellant's process of drawing/re-drawing imported flux cored wire to achieve desired shape, dimension, and layering amounted to manufacture under Section 2(f) of Central Excise Act, 1944. The tribunal found the department improperly introduced new evidence (Panchnama dated 05.06.2020) after the show cause notice, changing their case beyond the remand order's scope. The extended period of limitation was deemed inapplicable as all facts were within the department's knowledge through audit reports. The CENVAT credit demand was held unsustainable on both merits and limitation grounds, and the appeal was allowed.

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Issues Involved:
1. Whether the activity of converting unlayered semi-finished flux cored wire amounts to manufacture.
2. Whether Cenvat credit can be denied once the duty has been paid and collected on the final product.
3. Whether the department can argue that the activity did not amount to manufacture after collecting the duty on the final product.
4. Whether the Respondent passed the Impugned Order beyond the scope of the show cause notice and statement of demand.
5. Whether the Respondent followed the direction given by the Tribunal in the Remand order or went beyond it.
6. Whether the department can introduce new evidence or investigate the matter post issuance of show cause notice/after the first round of litigation.
7. Whether the extended period of limitation is invokable in the present case.

Summary:

1. Whether the activity of converting unlayered semi-finished flux cored wire amounts to manufacture:
The Tribunal concluded that the activity of converting unlayered semi-finished flux cored wire into fully layered flux cored wire amounts to manufacture. This conclusion was based on Note 10 of Section XV of the Central Excise Tariff Act, which states that the process of drawing or re-drawing a rod, wire, or any other similar article into wire amounts to manufacture. The Tribunal also relied on a Chartered Engineer's certificate and various technical documents that detailed the manufacturing process and its significance.

2. Whether Cenvat credit can be denied once the duty has been paid and collected on the final product:
The Tribunal held that Cenvat credit cannot be denied once the duty has been paid and collected on the final product. The department's acceptance of the duty paid on the final product implied that the activity carried out by the Appellant amounted to manufacture.

3. Whether the department can argue that the activity did not amount to manufacture after collecting the duty on the final product:
The Tribunal ruled that the department cannot argue that the activity did not amount to manufacture after collecting the duty on the final product. This position was supported by the fact that the department had already accepted the duty paid on the final product without any objections.

4. Whether the Respondent passed the Impugned Order beyond the scope of the show cause notice and statement of demand:
The Tribunal found that the Respondent had passed the Impugned Order beyond the scope of the show cause notice and statement of demand. The original show cause notice and statement of demand only alleged that the activity did not amount to manufacture. However, the Impugned Order introduced new evidence and arguments that were not part of the original allegations.

5. Whether the Respondent followed the direction given by the Tribunal in the Remand order or went beyond it:
The Tribunal concluded that the Respondent did not follow the direction given by the Tribunal in the Remand order. Instead of deciding the matter based on the documents and arguments presented, the Respondent conducted a new investigation and introduced new evidence, which was beyond the scope of the remand order.

6. Whether the department can introduce new evidence or investigate the matter post issuance of show cause notice/after the first round of litigation:
The Tribunal held that the department cannot introduce new evidence or investigate the matter post issuance of show cause notice/after the first round of litigation. The introduction of new evidence, such as the Panchnama and the statement of Mr. Shinde, was found to be beyond the scope of the original show cause notice and the first round of litigation.

7. Whether the extended period of limitation is invokable in the present case:
The Tribunal ruled that the extended period of limitation was not invokable in the present case. The Appellant had been regularly audited by the department, and all relevant facts were within the knowledge of the department. Therefore, the invocation of the extended period of limitation was not justified.

Conclusion:
The Tribunal allowed the appeal filed by the Appellant, quashing and setting aside the Impugned Order. The Tribunal held that the activity carried out by the Appellant amounted to manufacture, and therefore, the denial of Cenvat credit was not sustainable. The Tribunal also ruled that the department's actions were beyond the scope of the show cause notice and remand order and that the extended period of limitation was not applicable. The appeal was allowed with consequential reliefs.

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