By TIOL News Service

MUMBAI, JAN 06, 2014: THIS is a Revenue appeal.

The respondents are engaged in the manufacture of HG Capsules and they have packing films division and capsules division in their factory, where they undertake cutting and slitting of jumbo rolls of aluminium foil rolls into smaller rolls. Under the bonafide belief that cutting and slitting of jumbo rolls amounts to manufacture, the respondent discharged excise duty liability thereon and also availed CENVAT Credit of the CVD paid on jumbo rolls.

On the ground that the activity of cutting and slitting of Jumbo rolls into smaller rolls did not amount to manufacture, a demand notice was issued to the appellant requiring reversal of CENVAT Credit amounting to Rs.1,54,33,170/-. The proceedings were dropped by the Commissioner holding that the activity amounts to manufacture and, therefore, the appellant has rightly availed the CENVAT Credit.

As mentioned, Revenue is aggrieved with this decision and is before the CESTAT.

It is submitted that in the case of S R Tissue Pvt. Ltd. (2005-TIOL-194 -SC-CX) the Apex court has held that cutting and slitting of jumbo of rolls aluminium foils into smaller size would not amount to manufacture and, therefore, the order of the adjudicating authority is incorrect and needs to be set aside.

However, it is fairly admitted by the Revenue representative that the Government of India has issued a Notification No. 24/2012-CE(NT) dated 19/04/2012 in terms of section 5B of the CEA, 1944 and wherein it is provided that reversal of CENVAT Credit taken is not required subject to the following conditions, namely;

a) the said non-reversal shall be allowed only for the CENVAT Credit taken upto the 15 th of March, 2012.

b) The said non-reversal shall be allowed only when excise duty has been paid on removal of the said final product.

c) the said assessee shall not prefer a claim of refund of the excise duty paid by him on the said final product.

Inasmuch as in terms of the impugned notification the appellant is eligible for the benefit of said notification but the criteria prescribed in condition (c) is required to be verified by the adjudicating authority, submitted the Revenue.

The respondent submitted that they have not preferred any refund claim of the excise duty paid by them on the final product and, therefore, they are eligible for the benefit of the said exemption.

The Bench observed -

“ 6.1 In view of Notification NO. 24/2002-CE dated 19/04/2012, the respondent herein is not required to reverse the CENVAT Credit taken of the excise duty or CVD paid on the materials procured by them for undertaking the job-work on which they have discharged excise duty liability. The demand is also for the period up to 15/03/2012. Thus, the appellant has satisfied the conditions “(a) & (b)” specified in the said Notification. As regards the condition (c), the Ld. Counsel for the respondent submits that the appellant has not made any refund claim. Subject to verification of this claim by the department, the benefit of Notification No. 24/2012-CE is available to the appellant. Consequently, the question of demanding duty amounting to Rs. 1,54,33,170/- would not arise at all. Thus the appeal filed by the Revenue is devoid of merits and is liable to be dismissed, subject to verification of condition “(c)” of the impugned notification by the jurisdictional Assistant Commissioner of Central Excise.”

In passing: If y ou do not pay duty, you are crucified and if you do pay, you are doomed!

(See 2014-TIOL-28-CESTAT-MUM)