The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) held that ‘when the department has collected excise duty on finished products, the credit availed on the inputs cannot be denied, even without manufacture’.
The appellant, M/s. Schaeffler India Pvt. Ltd., was registered with the Central Excise Department and was engaged in activities like packing, re-packing, and labeling of automobile clutches, which amounts to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. The appellant had availed CENVAT credit for the above-mentioned activities. During the period from 01.04.2012 to 09.05.2012, they had wrongly claimed credit on some consignments where no manufacturing was done, in contravention of Rule 3 of the CENVAT Credit Rules, 2004.
A Show Cause Notice ( SCN )dated 29.04.2013 was issued to the appellant, demanding Rs. 1,70,46,634 under Rule 14 of CCR, 2004 with interest and penalties. The SCN also proposed to demand Rs. 33,53,720 used for exports, adjusted from ineligible credit, under Section 11AA of the Central Excise Act, 1944, with interest and a proposed penalty under Rule 25 of the Central Excise Rules, 2002.
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The Additional Commissioner of Central Excise, Chennai III Commissionerate, confirmed a demand for wrongly availed credit of Rs. 1,70,46,634 under Rule 14 of CCR, 2004 with Section 11A(1) of Central Excise Act, 1944, with interest, and imposed an equal penalty under Rule 15 of CENVAT Credit Rules, 2004. The lower adjudicating authority ( LAA ) upheld the demand of Rs. 33,53,720, adjusted using ineligible CENVAT credit, as non-payment of duty with interest but did not impose a penalty under Rule 25 of Central Excise Rules, 2002.
Although the assessee appealed before the Commissioner (Appeals), it was dismissed.
The main issue in this appeal is whether the appellant can claim CENVAT credit for clutches received from Unit 1 when no manufacturing process, such as packing, re-packing, labelling, or any treatment making the product marketable as defined under Section 2(f)(iii) of the Central Excise Act, 1944, has occurred.
It was contended by the counsel on behalf of the assessee that although no manufacturing process was undertaken by the appellant, it would have to be treated as clearance of CENVAT credit availed inputs as such, which can be cleared on payment of duty equal to the CENVAT credit availed.
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The bench did not find any merit in the impugned order as the department had collected duty on the finished products and thus held that the credit availed on the inputs cannot be denied, alleging that the activity does not amount to manufacture.
The CESTAT, consisting of Mr. Vasa Seshagiri Rao ( Technical Memebr ) and Mr. P. Dinesha ( Judicial Member ) ordered to set aside the impugned order.
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