By TIOL News Service

MUMBAI, JAN 21, 2015: THE appellant is manufacturing P.U. foam sheets and availing the benefit of CENVAT credit. The appellant had procured blocks of P.U. foam and cut them into different sizes and shapes and sold the same on payment of duty. The lower authorities were of the view that the appellant's activity does not amount to "manufacture" and availment of CENVAT credit on P.U. foam blocks was irregular.

SCN was issued for recovery of the CENVAT availed and imposition of interest and penalty. The adjudicating authority confirmed the demand and imposed interest & equivalent penalty.

The Commissioner(A) sided with this decision and, therefore, appellant is before the CESTAT.

The appellant submitted that the products manufactured by the appellant, though loosely termed by them as P.U. foam sheets were, in fact, various articles of P.U. foam; that it is not disputed that the appellant had paid CE duty on these articles; that having discharged the duty liability, availment of CENVAT credit on the P.U. foam blocks was correct. Reliance is placed on the decisions in the case of Creative Enterprises - 2008-TIOL-784-HC-AHM-CX, CCE, Pune-III vs. Ajinkya Enterprises - 2012-TIOL-578-HC-MUM-CX to buttress their argument that once the department has collected the duty from an assessee considering the product as manufactured, CENVAT credit cannot be denied on the inputs consumed for manufacture of the said final products.

The AR submitted that there is no change in the description of the final produce manufactured by the appellant and the appellant is only cutting the P.U. foam blocks and clearing the sheets, which is not the manufacturing activity. Assistance is taken of the Supreme Court decision in the case of Aman Marble Industries Pvt. Ltd. vs. CCE, Jaipur - 2003-TIOL-18-SC-CX where it is held that by cutting of marble blocks into slabs, no new product is coming into existence, hence not a manufacturing activity. The apex court decision in CCE, New Delhi-I vs. S.R. Tissues Pvt. Ltd. - 2005-TIOL-194-SC-CX is also relied upon for the same proposition.

The Bench observed -

++ We find that the appellant is procuring P.U. foam blocks which are covered under Chapter Heading No. 3920 or 3921, on which central excise duty has been discharged by the manufacturer. We also note that the products as got manufactured by the appellant were classified by them under Chapter Heading No. 3926. After classifying the said product under Chapter Heading 3926, the appellant had discharged central excise duty which has been accepted by the Revenue. In the entire proceedings before us, we find that the classification described by the appellant as to the products which are falling under Chapter Heading 3926, remains the same and is not disturbed by the adjudicating authority or the first appellate authority. This itself is an indicator that the original input, P.U. foam block, has undergone change and is now other than the inputs which were procured by the appellant.

++ Yet another angle to the entire issue is when the appellant is discharging central excise duty on the products which they consider as manufactured products and the Revenue authorities also having accepted the central excise duty, in our considered view, the appellant eligible, rightfully to avail CENVAT credit of the central excise duty paid on the inputs. This is the settled law.

Holding that the judgments cited by the appellant are directly on the point and will have more persuasive value, the case laws cited by the AR were distinguished.

The order was set aside and the appeal was allowed.

(See 2015-TIOL-156-CESTAT-MUM)