Case Law Details
Mangal Singh Bros. Pvt. Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
Post 2003 amendment; activity of cutting, labelling, re-labelling etc. under certain chapters would amount to “manufacture” without going into the question of manufacture; once duty on the final product has been accepted; cenvat credit cannot be denied
We share the recent order passed by the Hon’ble CESTAT, Mumbai. The appellant is selling V belts. It was selling the said goods after cutting, packing/repacking and labelling. It paid central excise duty on the said final product and availed cenvat credit. The central excise department, after an audit, alleged that the activity undertaken by the appellant does not amount to “manufacture” under section 2(f) of the Central Excise Act. Hence, sought to recover the cenvat credit availed by the appellant on the ground that there is no “input” in terms of Rule 2(k) of the Cenvat Credit Rules, 2004. Demands along with interest and penalties were confirmed. appeal was rejected. Hence, appeal before the Hon’ble Tribunal.
The Hon’ble CESTAT, Mumbai set aside the demand and allowed the appeal with direction for refund, along with interest. It held: (i) post 2003 amendment; activity of cutting, labelling, re-labelling etc. under certain chapters would amount to “manufacture”; (ii) without going into the question of manufacture; once duty on the final product has been accepted; cenvat credit cannot be denied; (iii) follows Hon’ble Bombay High Court in Ajinkya Enterprises case and the Hon’ble Gujarat High Court judgment in Creative Enterprises case.
The matter was argued by Ld. Counsel Bharat Raichandani
FULL TEXT OF THE CESTAT MUMBAI ORDER
Direction for recovery of CENVAT Credit of ₹25,61,369/- with interest allegedly taken erroneously without undertaking any manufacturing process alongwith direction for payment of equal penalty under Rule 14 & 15(2) of the CENVAT Credit Rules, 2004 read with Section 11A(5), 11AA and 11AC of the Central Excise Act, 1944 for the disputed period June, 2008 to March, 2013 that received confirmation by the Commissioner (Appeals), in the Order-in-Appeal noted above, is assailed by the Assessee-Appellant before this forum.
2. Fact of the case, in a nut shell, would go to show that Appellant was engaged in cutting, labelling and packing of goods like transmission belts, conveyers belt, trimming belts etc. and was clearing the same on payment of duty by treating the same as manufacturing of excisable goods. It had paid excise duty on final product for a cumulative amount of ₹31,27,075/- for the disputed period June, 2008 to March, 2013 and also availed CENVAT Credit of ₹25,61,369/- for the said period. Central Excise Audit was conducted in the Appellant’s factory, who raised objection to the effect that Appellant was only putting logo of “MSB” on the “Vee belts” received in its other factory after cutting the same to size and the said activity cannot be considered as manufacturing process, for which there was a proposal for denial of CENVAT Credit availed by the Appellant as such credit was taken contrary to Rule, 2K of the CENVAT Credit Rules, 2004. Accordingly, Appellant was put to show-cause notice, matter was adjudicated and the proposal for recovery of CENVAT Credit taken by it alongwith interest and equal penalty was confirmed through an adjudication order. Appellant’s unsuccessful attempt before the Commissioner (Appeals) has brought the dispute to this forum.
3. During course of hearing of the appeal, learned Counsel for the Appellant Mr. Bharat Raichandani submitted that the process undertaken by them including cutting of its length, physical checking of defects including smoothness, edge of the surface etc., removal of “Vee belts” logo available at the time of importation and its substitution by Appellants MSB Logo through skilled workers, without damaging the embossed portion containing the previous logo and packing the same for the purpose of export in special export approved packing as per international standard, would amount to manufacture for which Appellant had discharged excise duty liability on the same and duly availed the credits, which though was reversed after the audit objection. He further submitted that if Department takes a stand that it doesn’t amount to manufacture then it was supposed to refund the duty paid which is higher by an amount of nearly ₹5.5 lakhs of the credit availed and therefore, in no way Respondent-Department would be a gainer in the entire exercise. In placing reliance on the decision of the Hon’ble Bombay High Court in the case of CCE, Pune-III Vs. Ajinkya Enterprise reported in 2013 (294) ELT 203 (Bom) which has laid down the law in the field that ‘once duty on final product has been accepted by the Department, CENVAT Credit availed need not be reversed even if the activity doesn’t amount to manufacture’. He has also drawn our attention to the judgment passed by the Hon’ble Gujarat High Court in the matter of CCE and Customs, Surat-III Vs. Creative Enterprises [2009 (235) ELT 785 (Guj)] that had been affirmed by the Hon’ble Supreme Court as reported in 2009 (243) ELT A 120 (SC), in which identical view has been taken. He also pleaded against invocation of extended period by placing reliance on the judgment passed by this Tribunal in the case of Ashpra Textiles Pvt. Ltd. and Ashok M. Jain Vs. Commissioner of Central Excise, Mumbai-II [2010 ELT 253 0138] to justify that there was no suppression of fact or wilful mis-statement with any mala fide intention to evade duty for which he prays to set aside the order passed by the Commissioner (Appeals).
4. In response to such submission, learned Authorised Representative for the Respondent-Department Mr. Xavier P.M. Mascarenhas has argued in support of the reasoning and rationality of the order passed by the Commissioner (Appeals) and has drawn our attention to the CBEC Circular No. 911/1/2010-CX dated 14.10.2010, that has been noted by the Commissioner (Appeals) in para 32 of his order, wherein clear direction was available regarding non-availability of CENVAT Credit if the process doesn’t amount to manufacture when no new identifiable and marketable product having distinct name, character or use would emerge. Further, placing reliance on the judgment of the Hon’ble Supreme Court passed in the case of Commissioner of Central Excise, Chennai-II 2015 (322) ELT 418 (SC), he further argued that mere cutting of conveyor belt into smaller sizes would not amount to manufacture unless it would be shown that cutting had transformed the impugned product, for which he sought for no interference by this Tribunal in the order passed by the Commissioner (Appeals).
5. We have gone through the case record, relevant provision of law a. vis. relied upon notification and judgments. At the outset, it has to be taken on record that w.e.f. 01.03.2003 certain goods undergoing packing, repacking, labelling, relabeling were to be considered as manufacture, even if it is not brought on record as to if the alleged product is goods specified in third schedule of the Central Excise Tariff Act and even if it is accepted that the process undertaken by the Appellant before submitting the products to clearance was not to be considered as manufacture, still Appellant had taken the stand even before the Adjudicating Authority that in such an event duty was refundable to it, which is admittedly much higher than the CENVAT Credit availed during the said period that was held by the Respondent-Department as inadmissible. Be that as it may, without going into the intricacy of the process of manufacture or the interpretation of provision of law dealing with such manufacturing process, in view of the settled position of law that has been reiterated by the Hon’ble Bombay High Court in the case of Ajinkya Enterprise (Respondent) cited supra that when duty is accepted by the Department against clearance of a manufactured product, CENVAT Credit availed by the manufacturer can’t be denied to it. Hence, in carrying forward the judicial precedent set on the issue that has been affirmed even at the Hon’ble Apex Court level, the following order is passed.
THE ORDER
6. The appeal is allowed and the order passed by the Commissioner of Central Excise (Appeals), Mumbai-II vide Order-in- Appeal No. CD/636/RGD/2014-15 dated 24.09.2015 is hereby set aside with consequential relief of refund of credit, that was reversed by the Appellant, with applicable interest as per law and the Respondent-Department is directed to pay the same within two months of receipt of this order.
(Order pronounced in the open court on 17.10.2024)
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