IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
C.E.A. No. 105 of 2008
DATE OF DECISION: January 7, 2009
Commissioner of Central Excise, Delhi-III, Gurgaon
...Appellant
Versus
M/s Neel Metal Products Ltd., Gurgaon
...Respondents
CORAM: HON'BLE MR. JUSTICE M.M. KUMAR
HON'BLE MR. JUSTICE H.S. BHALLA
Present: Mr. Kamal Sehgal, Senior Panel Counsel,
Union of India, for the appellant.
1. Whether Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporters or not?
3. Whether the judgment should be reported in
the Digest?
M.M. KUMAR, J.
The revenue has approached this Court by invoking
Section 35-G of the Central Excise Act, 1944 (for brevity, ‘the Act’),
challenging final order dated 19.3.2008, passed by the Customs,
Central Excise & Service Tax Appellate Tribunal, New Delhi (for
brevity, ‘the Tribunal’). It has claimed that the following substantial
question of law would arise for determination of this Court.
C.E.A. No. 105 of 2008 2
“Whether CENVAT credit is admissible on the inputs
where activities undertaken by the supplier of inputs did
not amount to manufacture in view of facts mentioned in
appeal”
In order to put the controversy in its proper perspective,
the facts in brief as disclosed in the appeal may be noticed. The
respondent M/s Neel Metal Products Ltd. are engaged in manufacture
of excise goods, namely, sheet metal components and blanks etc.
falling under Chapter Heading No. 7318 and 7211 of the first
schedule appended to the Act. They are registered manufacturer
under the Central Excise and had taken Cenvat credit of Rs.
30,70,388/- in respect of the period 2.3.2005 to 24.3.2005 (Central
Excise Duty of Rs. 30,10,184/- and Education Cess of Rs. 60,204/-)
on CR/HR/SS Copils/Strips.
The Cenvat credit was claimed on the basis of invoices
of supplier. The revenue alleged that the activities of the supplier
M/s Allied Metal Technologies, Faridabad, did not amount to
manufacture as per circular dated 2.3.2005, issued by the Department.
A show cause notice was slapped on the respondent on 29.8.2005 in
respect of inputs received by them from supplier M/s Allied Metal
Technologies for denying the benefit of Cenvat credit in view of
circular dated 2.3.2005. It was also stated in the notice as to why
recovery under Rule 12 of the Cenvat Credit Rules, 2002 (for brevity,
‘the Rules’) read with Section 11A of the Act be not made. Even the
C.E.A. No. 105 of 2008 3
interest was sought to be recovered by invoking Section 11AB of the
Act alongwith penalty under Rule 13(1) of the Rules.
The Additional Commissioner of Central Excise while
adjudicating the case, vide order-in-original, dated 31.1.2006
accepted the plea of the Department and dis-allowed the Cenvat credit
and confirmed its demand under Rule 12 of the Rules read with
Section 11A of the Act alongwith interest under Section 11AB of the
Act and penalty of Rs. 10,00,000/- under Rule 13(1) of the Rules (A-
1).
On appeal, the Commissioner of Central Excise upheld
the order-in-original, vide his order dated 15.12.2006 (A-2). An
appeal before the Tribunal was filed vide its final order dated
19.3.2008, the Tribunal has set aside order dated 15.12.2006 by
sustaining the argument of the respondent-assessee that the supplier
of inputs paid duty and that supplier of inputs was not a party to the
proceedings. In that regard, the Tribunal has placed reliance on a
judgment of Hon’ble the Supreme Court in the case of M/s Sarvesh
Refractories Pvt. Ltd. v. CCE, 2007 (218) ELT 488 in its order
dated 19.3.2008 (A-3). The operative part of the order reads thus:-
“4. We find that prior to 2.3.05, the processes
undertaken by the supplier of inputs are treated as
manufacture of goods. Only w.e.f. 2.3.05 the same
process as per Board’s circular does not amount to
manufacture. The supplier of inputs paid duty which is
not in dispute. The supplier of inputs is not a party to the
C.E.A. No. 105 of 2008 4present proceedings. The revenue denied the benefit of
credit taken by the recipient of inputs. Hon’ble Supreme
Court in the case of Sarvesh Refractories (P) Ltd. (supra)
[Sarvesh Refractories (P) Ltd. v. Commissioner of
Central Excise & Customs, 2007 (218) E.L.T. 488
(S.C.)] held that the appellant-assessee as consumer
cannot get classification changed under which goods
were cleared by the manufacturer. In view of the above
discussion, we find merit in the contention of the
appellant. The impugned order is set aside and the
appeal is allowed.”
Learned counsel for the appellant-revenue has argued
that the supplier of the assessee did not indulge in any manufacturing
activity and, therefore, no Cenvat credit could have been claimed on
the basis of those invoices by the assessee-respondent.
Having heard learned counsel for the appellant, we are of
the view that the goods supplied to the assessee were covered under
Chapter Heading No. 7318 and 7211 of the first schedule appended to
the Act. The assessee could not have got the classification of the
goods changed. The fact that the duty was paid on those inputs is
evident from the invoices indicating the payment of duty for which
credit has been taken. It appears that the goods were manufactured
prior to 2.3.2005 and the circular dated 2.3.2005 was not to apply in
any case. The view taken by the Tribunal does not suffer from any
legal infirmity warranting admission of the appeal because no
C.E.A. No. 105 of 2008 5
question of law would arise. The matter seems to be covered in
favour of the assessee by the judgment of Hon’ble the Supreme Court
in the case of Sarvesh Refractories (P) Ltd. (supra). There is, thus, no
merit in the appeal. Dismissed.
(M.M. KUMAR)
JUDGE
(H.S. BHALLA)
January 7, 2009 JUDGE
Pkapoor