TMI Blog2014 (9) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to manufacture, it amounts to saying that the appellant have cleared the Cenvat credit availed inputs as such and this 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 undertaken by 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 inputs 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 5B, which were introduced with effect from 11-5-2007 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 11-5-2007 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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 the Tribunal, as upheld by the higher Courts which have dealt with the identical issue and have held 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. Creative Enterprises - 2009 (235) E.L.T. 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 there 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) E.L.T. A120 (S.C.). Reference can also be made to Tribunal order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 (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. 9. The undisputed facts on record are that the appellants were availing the benefit of the Cenvat credit of duty paid on the input materials and were paying the duty of excise on their final product 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the said section, whether, there would be any debarring for deciding the disputed issue in the light of the precedent decisions and in the legal manner. The answer would be an emphatic No . Merely because, no notification stands issued under the said section by the Government of India, the assessee cannot be estopped 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 Courts, 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. 940/1/2011-CX, dated 14-1-2011 and Circular No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 circular may kindly be acknowledged. 6. Hindi version will follow. 13. As is seen from above the same is in reference to the notification required to be issued by the Central Government under the provisions of [Section] 5B and gives liberty to the assessee to approach 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 estop him from pursuing the legal remedy before the Courts. 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 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently 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 allowed the appeal with consequential relief to the appellant. We ordered accordingly. (Pronounced in the open Court .. ) Sd/- (Archana Wadhwa) Member (Judicial) 16 . [Per : Manmohan Singh, Member (T)]. - I have gone through 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 v. Union of India reported in 2004 (178) E.L.T. 1099. Reference was also made to H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Cenvat Credit Rules, 2004, read with Rule 6, credit of duty paid on the inputs is allowed only if these inputs are used in the manufacture of a final product. The Board vide Circular dated 26-9-2007 issued from F. No. 93/1/2005-CX3, had clarified that if the process does not amount to manufacture, duty is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the Central Government. Notification can be issued only in those cases where duty is levied by the Department which is later contested and finally not confirmed by appellate authorities. This is not the situation in the present case. Contention that duty was paid on a higher value for which input credit can be availed cannot find favour of law. It is also observed that Circular No. 911/1/2010-CX, dated 14-1-2011 is in respect of 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 past cases. There is nothing 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of slitting and pickling of CR coils undertaken does not amount to manufacture as held by Member (Judicial)? OR Whether once an activity of slitting and pickling of CR Coils does not amount to manufacture as held by Hon ble Delhi High Court in the case of Faridabad Iron Steel Traders Association v. Union of India in 2004 (178) E.L.T. 1099 and Circular Nos. 940/1/2011-CX, dated 14-10-2011 and 911/1/2010-CX, 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)? Sd/- (Manmohan Singh) Member (Technical) Sd/- (Archana Wadhwa) Member (Judicial) (Pronounced) 28 . [Per : Rakesh Kumar, Member (T)]. - The appellants 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 1-2-2009 to 31-10- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t company and penalty of ₹ 5 Lakh each on Shri Neel Kamal Srivastava and P.S. Chauhan, Authorised Signatories of the appellant company under Rule 26 of the Central Excise Rules, 2002. 28.1 Against this order of the Commissioner, these two appeals have been filed by the appellant company, Shri Vikash Agarwal, its Director and Shri P.S. Chauhan, the Authorised Signatory. 28.2 This appeal was heard for final disposal on 6-8-2013. While the Hon ble Member (Judicial) by an order dated 26-9-2013 set aside the Commissioner 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 v. Union of India reported in 2004 (178) E.L.T. 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 14-1-2010 the appellant company could not take Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India reported in 2004 ((178) E.L.T. 1099 (Delhi), subjecting the HR coils to the process of slitting and pickling does not amount to manufacture, on going through the judgment, it will be seen that what has been held in this judgment is that the process of cutting and slitting of steel sheets in coils does not amount to manufacture, as no new commodity or article having distinct name, character and use emerges, and this judgment is silent about the process of pickling, that nowhere in this judgment, Hon ble 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 judgment of any High Court or Supreme Court holding that the process of pickling does not amount to manufacture, the provisions of Section 5B would not be applicable, that this would be a case of clearance of Cenvat credit availed inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leaded that it is the order recorded by the Hon ble Member (Judicial), which is correct. 32. Shri Yashpal Sharma, ld. Departmental Representative, pleaded that the process of subjecting the H.R. Coils to slitting and pickling do not amount to manufacture as no new product with distinct name, character and usages has emerged, that in spite of this, the appellant paid duty on the H.R. Sheets subjected to this process and availed Cenvat credit in respect of the H.R. Coils, that since the process 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 5B, 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to such condition as may be specified in the said notification. Thus, Section 5B becomes applicable when - (a) a manufacturer is paying duty on certain products being made by him and is availing Cenvat credit in respect of inputs, capital goods on input services used; and (b) the process being undertaken by the person for making that products has been held by some High Court or Apex Court as not amounting to manufacturing, as a result of which, there is no requirement 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 judgment 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, on going through this judgment, it is seen that what has been held in this judgment 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 judgment, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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