2025-VIL-2164-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Section 11AC and 11D of Central Excise Act, 1944 – Rule 2(k) of Cenvat Credit Rules, 2004 – Demand of credit – Appellant is engaged in manufacture of MS bars, ingots, etc. – Appellant received duty paid imported HR/CR coils from dealers and availed CENVAT credit on dealer invoices and sent coils to job workers for cutting and slitting – After audit, department issued show cause notice proposing demand of reversal of CENVAT credit and directing deposit of amounts collected as duty under Section 11D of the Act – Commissioner confirmed demands as proposed in show cause notice – Whether cutting/slitting amounts to Manufacture or not – HELD – Issue is no longer res integra, as Delhi High Court in case of Faridabad Iron & Steel Traders Association held that cutting/slitting does not amount to manufacture, which was affirmed by Supreme Court. Ratio of above case make it crystal clear that cutting/slitting does not amount to manufacture. Appellant knew this legal position well before the period of dispute. Issue is decided in favour of Revenue – Appeal dismissed - Absence of manufacturing activity – Denial of credit – Whether HR/CR coils were Inputs eligible for CENVAT credit – HELD – Rule 2(k) of the Rules excludes goods that have no relationship with manufacture. Input must have a direct and immediate nexus with manufacture of a final product. If there is no manufacturing activity, question of availment of input credit does not arise. Since no manufacturing activity was existed at Appellant’s factory during relevant period, HR/CR coils fails the very existential requirement of input under Rule 2(k) of the Rules. Payment of duty on non-manufactured goods cannot legitimise the credit. Demand of credit along with interest is upheld - Encashment of lapsed credit – Whether there was inflated valuation to encash lapsed credit – HELD – Department relied upon audit findings to arrive at overvaluation. Material available on record support Respondent’s allegation on inflation of data to attempt to encash the accumulated CENVAT Credit when there is no manufacture after 2010. There is a conscious inflation with intention to utilize & pass on lapsed credit by using a colourable device to circumvent credit lapsing - Collection of duty – Whether amounts collected as duty are liable under Section 11D of the Act – HELD – Section 11D(1A) of the Act mandates that any amount collected as representing duty of excise on goods that are exempt or not manufactured shall be deposited with Government. Since goods were not manufactured at all, amounts collected as duty from dealers are liable under Section 11D of the Act. Impugned order had rightly ordered deposit of amounts collected as duty under Section 11D of the Act. Recovery of deposits collected as laid down in Section 11D of the Act is confirmed - Invoking of extended period of limitation – Whether extended period was rightly invoked or not – HELD – Appellant’s ER-1 returns merely reflected that inputs were removed as such, but did not disclose that manufacture had ceased in 2010. Mere filing of returns does not automatically absolve suppression of facts unless all primary facts are disclosed. ER-1 Returns did not disclose essential facts. Extended period of limitation stands justified - Imposition of penalty – Whether penalty imposed under Section 11AC of the Act is sustainable – HELD – Since process undertaken by Appellant did not amount to manufacture, any amount collected as “duty” must be deposited under Section 11D of the Act. Not depositing such amount and misusing credit constitutes intentional misappropriation attracting penalty. Once conditions for invoking extended period are fulfilled, penalty under Section 11AC of the Act is mandatory. Penalty imposed under Section 11AC of the Act is upheld.
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