Central Excise Appeal No. 1420 of 2011

Decided On: 13.12.2023

Appellants: Vishal Precision Steel Tubes & Strips P. Ltd. Vs. Respondent: The Commissioner of Central Excise

Hon'ble Judges/Coram:
Dr. D.M. Misra, Member (J) and R. Bhagya Devi


Dr. D.M. Misra, Member (J)

1. This appeal is filed against Order-in-Original No.17 & 18/2011 dated 11.2.2011 passed by the Commissioner of Central Excise, Bangalore-I Commissionerate, Bangalore.

2. Briefly stated the facts of the case are that the appellantare engaged in the manufacture of excisable goods viz. Electric Resistance Welded (ERW) Steel Tubes falling under Central Excise Tariff Subheading 7306 9090. They availed cenvat credit on the inputs imported and used in the manufacture of finished goods as well as cleared the inputs 'as such' on payment of appropriate duty. Alleging that the appellant had availed irregular cenvat credit on the imported goods and cleared as such as the said tools neither inputs nor capital goods used in or in relation to the manufacture of their final products, hence show-cause notices dated 03.02.2010 and 11.8.2010 were issued to them for the period from January 2009 to December 2009 and January 2010 to June 2010 demanding duty of Rs.75,32,305/- and Rs.18,49,511/- respectively, with interest and also proposing penalties under Rule 15(1) of Cenvat Credit Rules, 2004. On adjudication, demands were confirmed with interest by the Commissioner, who in turn, rejected their appeal. Hence, the present appeal.

3. At the outset, the learned advocate for the appellant assailing the impugned order submitted that the appellant manufactures high-end precision for metal cutting industry and customise the goods as per the requirement of customers. They import raw materials / inputs for manufacture of finished goods and avail cenvat credit on the said imported / procured locally inputs as per the Cenvat Credit Rules, 2004. They cleared the final products on payment of duty and also at times cleared the inputs 'as such' for replacement of the worn-out items byE/1420/2011 discharging appropriate Central Excise duty on the sale price / transaction value of the inputs so cleared. Normally, the duty paid on such inputs cleared 'as such' is much higher than the credit availed on such inputs. It is their contention that in their own case for the earlier period 02.03.2005 to 30.06.2008, this Tribunal has set aside the confirmation of demand on same grounds vide Final Order No.21765/2015 dt. 6.8.2015, which was upheld by the Hon'ble Karnataka High Court as reported in Commissioner of Central Excise, Bangalore-V vs. Vishal Precision Steel Tubes & Strips Pvt. Ltd.: MANU/KA/0633/2017 : 2017:KHC(BB):7034-DB : 2017 (349) ELT 686 (Kar.), this the judgment of Hon'ble Bombay High Court in the case of CCE Vs. Ajinkya Enterprises: MANU/MH/2669/2012 : 2013(294) ELT 203 (Bom.). Further, he has submitted that there are series of judgments delivered by this Tribunal and Hon'ble High Courts of Karnataka, Gujarat and Bombay holding that once the inputs after being processed and the resultant cleared on payment of appropriate excise duty, cenvat credit availed on the inputs used in the manufacture of said finished goods cannot be held to be inadmissible even if the processes undertaken later found to be not amounting to manufacture. In support, he has referred to the judgment of Hon'ble of Gujarat High Court in the case of CCE Vs. Creative Enterprises [2009(235) ELT 785 (Guj.)], later upheld by the Hon'ble Supreme Court reported in 2009(243) ELT A120 (SC).

4. Learned Authorised Representative for the Revenue reiterated the findings in the impugned orders.

5. Heard both sides and perused the records. We find that the short issue involved in the present appeals is: whether the cenvat credit availed on imported/locally procured inputs when subjected to the processes by the appellant, disputed not to be a process of manufacture by the Revenue, then the cenvat credit availed on such inputs and utilised in discharging duty applicable on the processed goods be recoverable. In the present case, the appellants are engaged in the manufacture of various high precision tools, and also import certain parts used as inputs. The tools were customised and sold by the appellant on payment of appropriate duty of excise on its transaction value, which was more than the credit availed on the inputs. The Revenue disputed the processes undertaken on the imported items alleging the same do not result into manufacture of a new item different from the inputs; hence the activity undertaken by the appellant is purely in the nature of trading; therefore, cenvat credit availed on the inputs cannot be admissible.

6. We find that this issue is no more res integra as it has already been settled by various decisions as cited by the learned counsel for the appellant. In Ajinkya Enterprises case (supra), the Bombay High Court taking note of the arguments of the Revenue, more or less in the same line observed as follows:

"10. Apart from the above, in the present case, the assessment on decoiled HR/CR coils cleared from the factory of the assessee on payment of duty has neither been reversed nor it is held that the assessee is entitled to refund of duty paid at the time of clearing the decoiled HR/CR coils. In these circumstances, the CESTAT following its decision in the case of Ashok Enterprises - MANU/CC/0098/2008 : 2008 (221) E.L.T. 586 (T), Super ForgingsE/1420/2011 - 2007 (217) E.L.T. 559 (T), S.A.I.L. - MANU/CK/0123/2007 : 2007 (220) E.L.T. 520 (T) : 2009 (15) S.T.R. 640 (Tribunal), M.P. Telelinks Limited - 2004 (178) E.L.T. 167 (T) and a decision of the Gujarat High Court in the case of CCE v. Creative Enterprises reported in 2009 (235) E.L.T. 785 (Guj.) has held that once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity docs not amount to manufacture. Admittedly, similar view taken by the Gujarat High Court in the case of Creative Enterprises has been upheld by the Apex Court [see 2009 (243) E.L.T. A121] by dismissing the SLP filed by the Revenue. "

6.1. The said principle later followed by the Hon'ble Karnataka High Court in appellant's own case (supra). Their Lordships at para 7 observed as follows:

"7. It is an undisputed position that the final product is treated as dutiable and duty is paid by the assessee. When once duty is paid by the assessee treating the activity as manufacturing activity by the Department, Cenvat credit is available and there is no question of reversion of Cenvat credit. As such, in view of the aforesaid two decisions of the High Court namely, Bombay High Court and Gujarat High Court, we do not find any question of law would arise for consideration as sought to be canvassed."

7. In view of the settled principle of law referred to above, we do not see merit in the impugned order. Consequently, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law

(Order dictated and pronounced in Open Court.)

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