2016 (11) TMI 1610 - HC - Central Excise

Whether the Tata Ryerson Ltd. (assessee) who ceases to be manufacturer of excisable goods under section 2(f) of the Central Excise Act 1944 with effect from 02/03/2005 in view of Board s Circular No.811/8/2005-CX dated 02/03/2005 was permitted under law to take Cenvat Credit on or after 02/03/2005 on the excisable goods (i.e. HR/CR Coils) which were received by them from Tisco after payment of duty for slitting and cutting since Rule 3 of the Cenvat Credit Rules 2004 allowed only manufacturer of excisable final product to take credit? HELD THAT - It appears that HR Coils the goods which are prepared by the respondent is not an exempted goods at all as per definition given under Rule 2(d) of the Cenvat Credit Rules 2004. Hence there is no applicability of Rule 6(1) of the Cenvat Credit Rules 2004 whatsoever arises. Moreover it appears that the preparation of the HR Coils by the respondent is not manufacturing of goods at all because it is simply cutting slitting and strengthening of HR Coils purchased from Tata Steel. Appeal dismissed - decided against Revenue.

Summary

Issues:
1) Interpretation of Cenvat Credit Rules regarding the eligibility of an entity to claim credit after ceasing to be a manufacturer of excisable goods.
2) Determination of whether the conversion process carried out by the respondent constitutes manufacturing under the Cenvat Credit Rules.
3) Assessment of the applicability of Rule 6(1) of the Cenvat Credit Rules on the respondent's activities.
4) Examination of the tax liability and Cenvat credit availed by the respondent on HR Coils.

Issue 1:
The primary issue in this Tax Appeal revolves around the interpretation of the Cenvat Credit Rules concerning the eligibility of Tata Ryerson Ltd. to claim Cenvat Credit after ceasing to be a manufacturer of excisable goods. The question raised pertains to whether the company was permitted under the law to take credit on excisable goods received for processing, considering Rule 3 of the Cenvat Credit Rules, 2004. The Court analyzed the facts and circumstances, focusing on the nature of the respondent's operations in relation to the manufacture of Hot Rolled Coils (HR Coils) sourced from Tata Steel.

Issue 2:
The Court delved into the determination of whether the activities carried out by the respondent, involving cutting, slitting, and strengthening of HR Coils purchased from Tata Steel, amount to manufacturing as defined under Section 2(d) of the Cenvat Credit Rules, 2004. Previous decisions by the Delhi High Court and the Division Bench of the Court were considered, indicating that the conversion process undertaken by the respondent did not qualify as manufacturing. The judgment in Tax Appeal No. 21 of 2007 highlighted this aspect, emphasizing that the preparation of HR Coils did not meet the criteria for manufacturing under the Cenvat Credit Rules.

Issue 3:
The Court examined the applicability of Rule 6(1) of the Cenvat Credit Rules, 2004, concerning the availing of Cenvat credit on inputs of exempted goods. It was observed that the HR Coils prepared by the respondent were considered exempted goods, leading to the disallowance of Cenvat credit availed by the respondent. The imposition of penalty and the subsequent appeal process, culminating in the decision by CESTAT, Eastern Zonal Branch, Kolkata, were scrutinized to determine the correctness of disallowing the Cenvat credit under Rule 6(1).

Issue 4:
Lastly, the Court assessed the tax liability and Cenvat credit availed by the respondent on HR Coils. It was noted that the HR Coils were not classified as exempted goods under Rule 2(d) of the Cenvat Credit Rules, 2004, negating the application of Rule 6(1) in this scenario. The Court reiterated that the respondent's activities did not amount to manufacturing but rather involved processing activities on raw materials purchased from Tata Steel, as established in previous judgments. The Court emphasized that the circular dated 02.03.2005 did not apply in this context due to the nature of the goods involved.

In conclusion, the Court dismissed the appeal, stating that the question raised had already been addressed in previous decisions, indicating a lack of substance in the appeal. The judgment provided a detailed analysis of the issues raised, focusing on the interpretation of the Cenvat Credit Rules, the manufacturing process undertaken by the respondent, the applicability of Rule 6(1), and the tax implications of the activities in question.