TaxTMI 
TaxTMI 
2014 (9) TMI 974
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....nvat credit of duty paid on the inputs. 2. Ld. Advocate appearing for the appellant draws our attention to umpteen number of Tribunal's decision laying down that inasmuch as duty was being paid on the final product cleared by the assessee, the entire exercise is Revenue neutral. He submits that though all the above decisions were placed before the adjudicating authority, he has chosen to ignore the same and has not given any finding as to why the same are not applicable. He also clarifies that whereas the credit availed by them is to the extent of around Rs. 37 crores, the duty paid by them on the final product is around Rs. 42 crores. As such, he submits that by using the said credit for payment of duty on the goods cleared by them, the same already stands reversed by them and as such, second time confirmation of the same without there being any whisper of the duty paid by them is neither justified nor warranted. He draws our attention to various decisions, wherein under similar circumstances, denial of credit order was set aside. 3. Ld. Jt. CDR appearing for the Revenue reiterates the findings of the adjudicating authority and submits that once the process underta....
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....ure of their final product and was utilizing the said Cenvat credit in discharge of duty on their final product. Revenue, on the ground that the said activity does not amount to manufacture, denied the credit of around Rs. 37,03,91,917/- availed by them during the period 1-2-2007 to 31-10-2009 and utilized, by making debit entries, towards Excise duty on their final product. In addition to utilization of the said Modvat credit, the appellant also paid duty in cash to the extent of around rupees six crores. However, the Revenue, while denying the Cenvat credit is absolutely silent about the duty paid by the assessee on their final product, which they were not required to pay on account of the process undertaken by them, not being a manufacturing process. 6. As such, the issue required to be decided in the present case is as to whether such availment of credit, which already stands utilized by them for payment of duty on their final product is required to be denied to them, as held by the lower authorities or no duty is required to be confirmed against the appellant, by denying the credit, as contended by the learned Advocate. We find that there are number of decisions by ....
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....382 (Tri.-Del.). In the latter case, the Tribunal held that Cenvat credit cannot be denied to the assessee on the ground that process of galvanization does not amount to manufacture. Accordingly, the demand raised for disallowing the Cenvat credit on C.R. coils and zinc was held unsustainable as Cenvat Credit Rules, 2004 allow the clearance of inputs 'as such' or after partially processing on reversal of Cenvat credit availed on these inputs. 8. Similarly, we may also take note of another decision of the Hon'ble Gujarat High Court in the case of CCE v. Delta Corporation - 2013 (287) E.L.T. 15 (Guj.) laying down that credit could not be denied on ground that no manufacturing activity was carried on by the assessee. Similarly, the Hon'ble Supreme Court in the case of CCE, Vadodara v. Narmada Chematur Pharmaceuticals Ltd. - 2005 (179) E.L.T. 276 (S.C.), by taking note of their earlier decision in the case of CCE, Ahmedabad v. Narayan Polyplasts & ors. - 2005 (179) E.L.T. 20 (S.C.)] has observed that the wrongly availed credit utilized for payment of duty and inasmuch as the duty paid and the credit availed were of identical amount, the consequence would be Revenue neutral. ....
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....ent may also specify in the notification referred to above for non-reversal of credit, if any, taken by the buyer of the said product." The contention of the learned JCDR is that the said section has not been considered in any of the judgments relied upon by the appellant. It is her submission that once a statutory provision exists in the Act, the same should not be ignored and the appellant, instead of challenging the impugned order before the Tribunal, should have approached the Board for issuance of notification under said section. On going through the said section, we find that the same empowers the Central Government to issue a notification, allowing credit of duty paid on the inputs and used for the manufacture of the final product, which also stand cleared on payment of duty subject to certain conditions. It is clear that the powers to issue notification vests in the Central Government, in terms of the said section. This section does not cast any liability on the assessee to approach the Central Government for the issuance of such a notification. The question to be decided is as to whether when there is no such notification issued by the Central Government, in terms of....
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....f the Central Excise Act, 1944, where an assessee, who has paid Excise Duty on a product under the belief that the same is excisable, but subsequently the process of making the said product, is held by the Court as not amounting to manufacture, in such cases, the Central Government may issue an order for non-reversal of such credit in past cases. 3. In view of above, following instructions are issued :- (i) In cases where the process undertaken by an assessee indisputably does not amount to manufacture, the department should inform the assessee about the correct legal position and advise him not to pay duty and not to avail credit on inputs. (ii) If the assessee has already paid duty, and in a situation where there is no manufacture as held by the Courts subsequently, and facts of the case are covered by the provisions of Section 5B of the Central Excise Act, 1944, the assessee is at liberty to approach the Central Govt. for issue of appropriate notification for regularization of the Cenvat credit availed. 4. Trade & Industry as well as field formations may be suitably informed. 5. Receipt of this c....
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....er his own discretion. This is the essence of judicial and quasi-judicial function. The authority exercising such powers cannot be influenced by any directions, instructions or the Circulars that may be issued by any other agency. Consequently, the Circular issued by the respondents cannot be permitted to interfere with the discretion of the judicial and quasi-judicial authorities. 96. The power to impose tax is essentially a legislative function and according to our constitutional scheme it cannot be delegated. The Excise Duty which the Legislature intends to impose must be imposed directly in accordance with law. By issuing the impugned circular the respondent cannot introduce Revenue legislation indirectly. The impugned circular also deserves to be quashed on this ground also." 14. As seen from above, the circulars issued by the Board cannot influence the instructions judicial or quasi-judicial function and the disputed issue has to be decided independently by interpreting the law. As such we do not find any merits in the above contention of the learned JCDR. 15. In view of the foregoing discussion, we deem it fit to set aside the impugned order and allow....
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....es agreed the activity to be manufacture, allowing of Cenvat credit against duty liability on the goods manufactured remained unquestioned by Hon'ble High Court. That judgment makes clear that no one can assume an activity to be manufacture and mere assumption does not confer right to Cenvat credit. 21. Issue is also settled in terms of the Circular No. 940/01/2011-CX, dated 14-1-2011 and Circular No. 911/1/2010-CX, dated 14-1-2011 in this regard. For ready reference both circulars are reproduced. Circular No. 911/1/2010-CX., dated 14-1-2010 F. No. 267/116/2009-CX8 Subject : Irregular availment of Cenvat credit on certain activities not amounting to manufacture - Regarding. Reference has been received from field formations stating that though certain activities including connectorising, testing, repacking and relabelling of feeder cables, cutting of HR/CR coils into sheets or slitting into strips do not amount to manufacture, such processors are taking Cenvat credit and justifying their Cenvat availment on ground that they are paying duty on final products. 2. The matter has been examined. As per the provisions of Rule 3 of the Ce....
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....t in case the assessee pays any amount as Excise Duty on such exempted goods, the same cannot be allowed as "Cenvat credit" to the downstream units, as the amount paid by the assessee cannot be termed as "duty of excise" under Rule 3 of the Cenvat Credit Rules, 2004. 3. The amount so paid by the assessee on exempted goods and collected from the buyers by representing it as "duty of excise" will have to be deposited with the Central Government in terms of Section 11D of the Central Excise Act, 1944. Moreover, the Cenvat credit of such amount utilized by downstream units also needs to be recovered in terms of the Rule 14 of the Cenvat Credit Rules, 2004. 4. Trade & Industry as well as field formations may be suitably informed. 5. Receipt of this circular may kindly be acknowledged 6. Hindi version will follow. 22. Learned Member (Judicial) held, that even if there is no manufacture and the Cenvat credit is taken and subsequently duty payment is made, it should be deemed to reversal does not stand to reason. Non-reversal of credit could be as per provisions of Section 5B under notification issued by the Central Government. Notification can be is....
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....y as manufacture and avail Cenvat credit on inputs forcibly and pay duty on finished goods not required to be paid under the law and then pass the credit to the buyer. In view of above discussion, I am of the view once the activity of cutting or slitting of steel sheet in coil form does not amount to manufacturing activity as held by Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Traders Association v. Union of India - 2004 (178) E.L.T. 1099, followed by circulars issued by Central Board of Excise and Customs there is no question of granting input credit against such manufacture. 26. In view of above, I am of the firm view that credit availed by the appellant on inputs against a activity not amounting to manufacture, is not available under laws. 27. I uphold the order of adjudicating authority demanding Cenvat credit and direct imposition of Rs. 5 crore (Rupees five crore only) and adjudication order is modified to such extent. Sd/- (Manmohan Singh) Member (Technical) DIFFERENCE OF OPINION Whether Cenvat credit on inputs can be allowed to be availed and further passed on to the buyers despite activity of slitting and pickli....
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....respect of the H.R. Coils used for this purpose, the appellant should not have taken Cenvat credit. It is on this basis that a show cause notice dated 10-2-2010 was issued to the appellant for demand of above-mentioned Cenvat credit along with interest and imposition of penalty on them under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. This show cause notice was adjudicated by the Commissioner, Central Excise (Adjudication), New Delhi vide Order-in-Original dated 5-9-2011 by which the Commissioner holding that the process of slitting and pickling does not amount to manufacture and hence, the Cenvat credit on the H.R. Coils used for this process has been wrongly taken, confirmed the above-mentioned Cenvat credit demand along with interest by invoking proviso to Section 11A(1) of the Central Excise Act, 1944 and besides this, while imposed penalty of equal amount i.e. Rs. 37,03,91,917/- on the appellant company under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944, imposed another penalty of Rs. 50 Lakh on Shri Vikash Aggarwal, Director of the appellant company and penalty of Rs.....
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....78) E.L.T. 1099 and Circular No. 940/1/2011-C.E., dated 14-10-2011 and 911/1/2010-C.E., dated 14-1-2011 issued by Board, then Cenvat credit on inputs cannot be allowed and it also subsequently cannot be passed over to buyers as held by Member (Technical)?" 30. Heard both the sides in respect of the point of difference. 31. Shri Amit Jain, Advocate, ld. Counsel for the appellant, pleaded that Section 5B of the Central Excise Act, 1944 comes in picture when an assessee has paid Excise Duty on the final products and has been allowed Cenvat credit of duty or tax or cess paid on inputs, capital goods or input services used in making of the said product, but subsequently the process of making the said product is held by the Court as not amounting to manufacture and therefore not chargeable to duty and in such circumstances, Central Government may by notification order for non-reversal of such credit allowed to the assessee subject to such conditions as may be specified in the said notification, that though Hon'ble Member (Technical) mentions that in view of the judgment of the Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Traders Association v. Union of I....
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....of credit to buyers, as in terms of the Rule 3(5) of the Cenvat Credit Rules, the amount paid on removal of cenvated inputs as such under this rule is required to be paid under an invoice issued under Rule 9 of the Cenvat Credit Rules, which is a valid document for availment of Cenvat credit by the customers. He also cited the judgment of the Tribunal in the case of Ajinkya Enterprises v. CCE reported in 2013 (288) E.L.T. 247 (T-M), wherein it was held that when the Cenvat credit availed on C.R. coils were cleared after subjecting them to a process, which did not amount to manufacture and the duty paid by the assessee is more than the Cenvat credit availed and has been accepted by the Department, there is no requirement for the assessee to again reverse the credit availed by him and that this judgment of the Tribunal has been upheld by the Bombay High Court vide judgment reported in 2013 (294) E.L.T. 203 (Bom.). He also submitted that the same view has been taken by the Tribunal in the case of Hino Motors Sales India Pvt. Ltd. reported in 2014 (299) E.L.T. 49 and also in the case of Heat Shrink Technologies Ltd. reported in 2007 (220) E.L.T. 437. He, therefore, pleaded that it is t....
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.... to manufacture, the appellant should not have availed the credit in respect of the H.R. Coils and should not have paid any duty on the cut/slitted and pickled H.R. sheets and since the duty on this process has been paid, they should have applied to the Central Government for issue of the necessary notification under Section 5B and since they do not do so and as such, there is no notification issued under Section 5B in respect of the process being undertaken by the appellant, the credit wrongly taken by the appellant in respect of H.R. Coils would be recoverable from them along with interest and they would be liable for penalty under the provisions of Rule 15 of the Cenvat Credit Rules. 35. Section 5B of the Central Excise Act, 1944, provides that where an assessee has paid duty of excise on a final product, and has been allowed Cenvat credit of the duty or tax or cess paid on inputs/capital goods and input service used in making of the said products, but subsequently the process of making the said product is held by the Court as not chargeable to Excise Duty, the Central Government may, by notification order for non-reversal of such credit allowed to the assessee subject t....