TMI Blog2014 (11) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... is something which is not prohibited, if at the time of removal of cenvat credit availed inputs, in terms of the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004, an amount equal to the cenvat credit availed is paid under an invoice issued under Rule 9 of the Central Excise Rules, 2002. There is no dispute that the amount paid by the appellant is more than the cenvat credit availed. In my view, therefore the assessee should not be penalized for paying more amount than their actual duty liability. Since Rule 3(5) itself requires that removal of cenvated inputs as such on payment of an amount equal to the cenvat credit availed has to be under an invoice issued under Rule 9 of the Central Excise Rules, 2002 and since in terms of the Rule 9(1) of the Cenvat Credit Rules, 2004, an invoice issued by a manufacturer under Rule 9 even for removal of cenvated inputs/capital goods as such is a valid document for availing cenvat credit, the Appellant s customer could avail cenvat credit on the basis of the invoices for pickled sheets issued by the appellant and as such, there is no illegality in the appellant’s passing on the cenvat credit. Since the amount paid on the clearance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant does not amount to manufacture, the availment of the credit of duty paid on the inputs, which is permissible only when the said input are used in the manufacture of the dutiable final product, cannot be held to be in accordance with law, She specifically mentions the reasoning of the adjudicating authority that once such credit is allowed and is used by the assessee for payment of duty on the final product, their buyers become entitled to the credit of the same. She also draws our attention to the provisions of Section 5(B), which were introduced with effect from 11.05.2007 empowering the Central Government to issue notification for non-reversal of such credit. She submits that all the decisions rendered by the Courts were either prior to 11.05.2007 or have not considered the provisions of Section 5(B). In as much, the Government of India has not issued any notification under the said section, the benefit of credit cannot be allowed. She further relied upon two Circulars of the Board, being circular no 911/1/2010-CX dt. 14.1.2010 and 940/1/2011-CX dt. 14.1.2011, which enables the assess to approach the Government for issuance of notification under Section 11(B). As su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the Cenvat credit availed in respect of inputs is not to be denied on the ground that activity undertaken by the assessee does not amount to manufacture. Reference can be made to Gujarat High Court decision in the case of CCE V/s. Creative Enterprises - 2009 (235) ELT 785 (Guj.) wherein the Hon'ble High Court held that - The Tribunal is justified in holding that if the activity of respondent-cum assessee does not amount to manufacture their can be no question of levy of duty and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture . The Revenue s further appeal before the Hon'ble Supreme Court was dismissed as reported in 2009 (243) ELT A126 (SC). Reference can also to be made to be Tribunal order in the case of PSL Holdings Ltd. V/s. CCE, Rajkot, 2003 (156) ELT 602 (Tri.-Mumbai) wherein it was held as under By utilization of credit for payment of duty which was not required to be paid, credit was effectively reversed and Revenue cannot once again ask for reversal of credit. 7. In another decision of the Tribunal in the case of Vickers Systems International Ltd. V/s. CCE, Pune-I 2008 (229) E.L.T. 298 (Tri. - Mumbai) has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct on the full value of the coated pipes. As such the credit availed by them was being utilized for payment of duty on the full value of the pipes. By adopting such an exercise, the credit availed by the appellants is reversed by way of utilizing the same for payment of duty on the final product which they were not required to pay. In these circumstances, in our views, the credit availed by the appellants and utilized by them for the purpose for which the same was not required to be utilized, already stands reversed by them. As such, they cannot be asked to once again reverse the credit so availed. Accordingly, we set aside the impugned order and allow the appeal with consequential relief to the appellants. 10. We also find that there are various decision of the High Court and the Hon'ble Supreme Court s, as discussed above and we are of the view that the Cenvat credit availed by the assessee is not required to be confirmed against them inasmuch the same already stands reversed by debiting the same for payment of duty on their final product and as such the entire situation becomes Revenue neutral. 11. Learned JCDR appearing for the Revenue, has not been able to shows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, no notification stands issued under the said section by the Government of India, the assessee cannot be estopped aspect from contesting the issue on merits. As already observed, the issue on merits stands decided by various Courts, which cannot be ignored and taken in light manner. Admittedly, the precedent decisions that too of Higher Court s, are required to be followed in terms of the judicial hierarchy and cannot be dismissed lightly on the ground that the provisions of section 5B were not considered in those judgments. 12. Similarly we find no merits in the contention of learned JCDR that in terms of the Circular No. 940/01/2011-CX dated 14.01.2011 and Circular No. 911/01/2010-CX dated 14.01.2011, the appellant was not entitled to the benefit of the Cenvat credit. It is seen that Circular No. 940 is in respect of the goods which were exempted in terms of notification issue under Section 5A of the Central Excise Act. As such same as no applicability to the present issue where the process undertaken by the appellant has been held to be not a manufacturing process. As regard circular No. 911/1/2010-CX., dated 14-1-2010, the same is in respect of the instruction issued to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproach the Central Government for issuance of appropriate notification. However, as already held that if the assessee does not approach the Central Government, the same cannot estopp him from pursuing the legal remedy before the Court s. In any case these circulars issued by the Board and their effect has been considered by the Hon'ble Delhi High Court in the case of Faridabad Iron Steel Traders Association 2004 (178) E.L.T. 1099 (Del.) wherein it stand held by the Hon'ble Court:- 93. In Orient Paper Mills v. Union of India reported as 1978 (2) E.L.T. (J345) (S.C.) = AIR 1969 SC 48 their Lordships of the Supreme Court has laid down that quasi judicial authorities should not allow their judgment to be influenced by administrative considerations or by the instructions or directions given by their superior. Therefore, instructions issued by the Board are not binding upon the adjudicating authority. 94. The impugned Circular was issued by the executive and sent to all Chief Commissioners of Central Excise, all Director General of Central Excise, all Commissioners of Central Excise (Appeals) and all Commissioners of Central Excise. Some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the draft order recorded by learned Member (Judicial) wherein appeals of the appellant have been allowed by setting aside the Order-in-Original. The Commissioner vide his impugned order confirmed duty of ₹ 37,03,91,917/- along with identical amount of penalty. Also denied benefit of Cenvat credit of duty availed on HR coils/ sheet which have undergone the process of slitting and pickling not amounting to manufacture. 17. Facts stated draft order has been gone through Learned Member set aside the impugned order on the ground of revenue neutrality following the decision of Hon ble Delhi High Court in the case of Faridabad Iron Steel Traders Association Vs. Union of India reported in 2004 (178) ELT 1099. Reference was also made to Hon ble Gujarat High Court decision in the case of CCE Vs. Creative Enterprises - 2009 (235) ELT 785 (Guj.) Further reference was also made to the judgement of Hon ble Gujarat High Court in the case of CCE Vs. Delta Corporation 2013 (287) E.L.T. 15 (Guj.) and Supreme Court in the case of CCE Vododara Vs. Narmada Chematur Pharmaceuticals Ltd. 2005 (179) E.L.T. 276 (S.C). 18. I do not agree with the reasons given by learned Member (J) to allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not required to be paid and hence no Cenvat credit of duty paid on inputs is admissible. Attention is also invited to the provisions of Section 5B of 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 availe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods where assessee has paid excise duty on a product under the belief that same is excisable but later it is held by Court not amounting to manufacture, Central Govt. may issue an order for non-reversal of such credit in pass cases. There is noting on record to show that Appellants have followed the provisions of section 5B. Relevant extract is reproduced as below. SECTION 5B Non-reversal of CENVAT credit where an assessee has paid duty of excise on a final product and has been allowed credit of the duty or tax or cess paid on inputs, capital goods and 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 chargeable to excise duty, the Central Government may, by notification, order for non-reversal of such credit allow to the assessee subject to such conditions as may be specified in the said notification : Provided that the order for non-reversal of credit shall not apply where an assessee has preferred a claim for refund of excise duty paid by him: Provided further that the Central Government may also specify in the notification referred to above for non-reversal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nputs cannot be allowed and it also subsequently cannot be passed over to buyers as held by Member (Technical). (MANMOHAN SINGH) (ARCHANA WADHWA), MEMBER (TECHNICAL) MEMBER (JUDICIAL) Per: Rakesh Kumar: 28. The appellant are engaged in the manufacture of CR coils/sheets, GP coils/sheets, PPGI coated coils, G.C. Sheets etc. chargeable to central excise duty under Chapter 72 of the Tariff. Their raw materials is H.R.Coils and also the zinc for galvanizing. They availed cenvat credit of excise duty paid on inputs and capital goods used in or in relation to manufacture of final products. The period of dispute in this case is from 01.02.2009 to 31.10.2009 and the dispute is in respect of cenvat credit on H.R. Coils. The appellant in addition to manufacture of CR Coils/Sheets, G.P. Coils/sheets, PPGI Coated Coils, etc. also subjected certain quantity of H.R. Coils to slitting and thereafter subjecting the same to the process of pickling which involves treatment with solution of Hydrocholoric Acid or Sulphuric Acids for cleaning the surface of the sheets and these cut and pickled HR Sheets were being sold by them to their customers. The appellant treating this process of cutti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner s order with consequential relief, Hon ble Member (Technical) by a separate order dated 25.3.2014 upheld the order passed by the Commissioner except for modification that penalty on the appellant company was reduced to ₹ 5 Crores. Hon ble Member (Technical) in his order relying upon the judgment of Hon ble Delhi High Court in the case of Faridabad Iron Steel Traders Association Vs. Union of India reported in 2004 (178) ELT 1099 held that the process of slitting and pickling of H.R. Coils does not amount to manufacture and, therefore, on the basis of the Board s Circular No.911/1/2010-CX dated 14.01.2010 dated 14.1.2010 the appellant company could not take cenvat credit in respect of the H.R. Coils and pass on the same to their customers by issuing invoices covering the clearances of the slitted and pickled H.R. Sheets, without issue of a notification by the Central Government under Section 5B of the Central Excise Act, 1944 for regularization of the cenvat credit availed and that since the Appellant neither approached the Central Government for issue of Section 5B notification nor any such notification as was issued, the Appellant could not take the cenvat credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this judgement, Honble High Court has held that the process of pickling of the H.R. Sheets/coils does not amount to manufacture, that as will be seen from the Tariff Heading No.7208 of the Central Excise Tariff, in this Heading, distinction has been made between the Hot Rolled Coils pickled and H.R. Coils, other than pickled, which shows that in course of trade, pickled H.R. sheets /coils are treated as a different and distinct commodity, that when there is no judgement of any High Court or Supreme Court holding that the process of pickling does not amount to manufacture, the provisions of Section 5 B would not be applicable, that this would be a case of clearance of Cenvat credit availed inputs/ H.R. Coils as such if the process undertaken is not treated as manufacture and, therefore, in terms of Rule 3(5) of the Cenvat Credit Rules, 2004, the appellant would be required to reverse the cenvat credit originally taken, that the payment of duty on removal of pickled H.R. sheets amounts to reversal of the cenvat credit in full, as the amount paid towards duty on the pickled H. R. Coils is about ₹ 42 Crores while the cenvat credit demand according to the department is about & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess of slitting and pickling of H.R. Coils being undertaken by the appellant did not amount to manufacture and since the appellant in respect of this process had paid duty on the slitted and pickled H.R. / Sheets and had availed cenvat credit in respect of the H.R. Coils, in terms of the provisions of Section 5 B, the appellant should have approached the Central Government for issue of the necessary notification for non-reversal of the cenvat credit, that since they did not approach the Central Government and no such notification has been issued, the appellant could not avail the cenvat credit and as such, the cenvat credit availed in respect of the H.R. Coils is irregular, that since the cenvat credit has been irregularly taken, the same could not be passed on by the appellant to their customers, and that in view of this, it is the order recorded by the Honble Member (Technical, which is the correct order. 33. I have considered the submission from both the sides and perused the records. 34. The appellants main raw material is duty paid H.R. Coils, which are used by them for manufacture of C. R. Coils/strips, G.P. coil/sheet, PPGI Coated Coils, G.C. Sheets etc,. Some qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for payment of duty on the final product and there is no entitlement for cenvat credit in respect of inputs, capital goods or input services. 36. Though according to the department, in view of Hon ble Delhi High Court s judgement in case of Faridabad Iron Steel Traders Association (supra), the process of slitting and pickling of H.R. coils by the appellant does not amount to manufacture, ongoing through this judgement, it is seen that what has been held in this judgement is that the process of cutting or slitting of steel coils to the required sizes does not amount to manufacture, as no new commodity and distinct article having distinct name, character and use has emerged. In this judgement, the excisability of pickling process has not been examined, as this was not the dispute in this case. The process of pickling involves treatment of the H.R. sheets/ coils by solution of acids and chemicals to remove surface defects and obtain a sheet with smooth surface. In Heading No.7208 of the Central Excise Tariff, there is separate sub-heading for H.R. Coils subjected to the process of pickling and probably because of this, the appellant were under impression that this process amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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