Appellant wins excise duty case - payment through CENVAT credit upheld under Section 5(1) choice

CESTAT Bangalore ruled in favor of appellant regarding excise duty payment through CENVAT credit utilization. The Tribunal held that findings on manufacturing activity were beyond the scope of the show cause notice, as no such allegation was made initially. The issue was already settled by previous Tribunal decisions establishing appellant's activity constituted manufacture. Regarding excise duty payment, the Tribunal accepted appellant's contention that under Section 5(1) of Central Excise Act, it was appellant's option to choose payment method, including whether to avail notification benefits. Failure to utilize available notification benefits cannot constitute duty evasion or justify penalty imposition. Appeal allowed.

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The issue in the present appeal before the Appellate Tribunal was whether the activity carried out by the appellant, an EOU engaged in the manufacture and export of iron ore lumps and fines, amounted to manufacture and whether the excise duty paid by the appellant utilizing CENVAT credit was recoverable.The Appellant cleared their manufactured excisable goods into DTA without claiming exemption and paid excise duty using CENVAT credit. The Revenue alleged that the duty paid was recoverable as it was passed on to customers and collected in cash, treating it as a deposit recoverable under the CENVAT Credit Rules, 2004. The Adjudication Authority confirmed the demand, leading to appeals by both the appellant and the department before the Commissioner (Appeals). The Commissioner (Appeals) held that the process undertaken by the appellant did not amount to manufacture and that the goods were not dutiable, upholding the department's appeal. This decision was challenged before the Tribunal.During the hearing, the appellant's counsel argued that the Commissioner (Appeals) exceeded the scope of the Show Cause Notice by determining that the process did not amount to manufacture. They cited various decisions in support of their contention. The counsel also highlighted relevant provisions, including an exemption under Section 5A(1A) of the Central Excise Act, 1944, and Notification No. 23/2003-CE.The appellant's counsel further argued that the mining activity undertaken by the appellant amounted to manufacture, contrary to the Commissioner (Appeals) finding. They referenced previous Tribunal orders in the appellant's favor on the issue of manufacture. Additionally, they relied on legal principles that when there are multiple provisions or exemptions available, the assessee has the right to choose the most beneficial option.The Authorized Representative for the department reiterated the findings of the impugned order, emphasizing that the appellant had deliberately paid duty to pass on the cost to customers for monetary gain.The Tribunal held that the findings of the Appellate Authority on manufacture were beyond the scope of the Show Cause Notice and referenced previous Tribunal orders supporting the activity as manufacture. They also agreed with the appellant's argument that the duty paid was not a deposit but a legitimate payment, and the appellant had the right to choose whether to claim exemption or not. Therefore, the Tribunal found the impugned order unsustainable and allowed the appeal with consequential relief.In conclusion, the Tribunal allowed the appeal, setting aside the impugned order, and provided relief to the appellant in accordance with the law.

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