Custom, Excise & Service Tax Tribunal
Haldia vs Rba Ferro Industries Pvt Ltd on 16 April, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Excise Appeal No. 75493 of 2016
WITH
Excise Cross Objection No. 75498 of 2019
(Arising out of Order-in-Original No. 15-17/Commissioner/CE/Haldia/Adjn/2015 dated
23.12.2015 passed by the Commissioner of Central Excise and Service Tax, Haldia
Commissionerate, 25, Princep Street, 3rd Floor, Kolkata - 700 072)
Commissioner of Central Excise and Service Tax : Appellant
Haldia Commissionerate,
25, Princep Street, 3rd Floor,
Kolkata - 700 072
VERSUS
M/s. RBA Ferro Industries Private Limited : Respondent
NH-6, Vill. & P.O.: Prasastha, P.S.: Domjur,
District: Howrah, PIN - 711 302
APPEARANCE:
Shri S.K. Dikshit, Authorized Representative, for the Appellant (Revenue)
Shri Kartik Kurmy, Advocate, for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 75944 / 2025
DATE OF HEARING / DECISION: 16.04.2025
ORDER:[PER SHRI K. ANPAZHAKAN] The present appeal has been filed by the Revenue against the Order-in-Original No. 15-17/Commissioner/CE/Haldia/Adjn/2015 dated 23.12.2015 passed by the Commissioner of Central Excise and Service Tax, Haldia Commissionerate, Kolkata - 700 072, wherein the Ld. Commissioner has allowed the CENVAT Credit availed and utilized by M/s. RBA Ferro Industries Pvt. Ltd. (hereinafter referred to as the "Respondent") and dropped the proceedings initiated in three Show Cause Notices.
Page 2 of 14Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019
2. The brief facts of the case are that the Respondent has engaged in the manufacture of Cast Iron Articles viz, manhole cover, sanitary articles falling under CH.73 of Central Excise Tariff Act '85. During the period from May, 2008 to February, 2015, the Respondents have also purchased 'Rough Frames', 'Rough Covers', 'Rough Rings' and 'Rough Risers' from M/s RB Agarwalla & Co. Pvt. Ltd. and availed CENVAT Credit of the duty paid by them on the said 'inputs'. The Respondent has undertaken processes such as grinding and chipping for smoothening / levelling the surface, painting, crating on the said 'inputs' and manufactured the final products namely, 'Frames' and 'Covers' or 'Rings' and 'Risers' putting them up in sets. The Respondent have cleared major portion of their goods for export under rebate on payment of duty and the rest portion cleared for export under Bond as well as for home consumption on payment of duty.
2.1. The Audit conducted at the Respondent's premises observed that the activities undertaken by them did not amount to 'manufacture' within the definition of Section 2(f) of the Central Excise Act, 1944 and hence, the Department was of the view that the Respondent were not eligible for availing and utilising the CENVAT Credit. Accordingly, three Show Cause Notices were issued to the Respondent proposing to deny the irregular credit availed by them, totally amounting to Rs.4,50,70,083/- covering the period from May, 2008 to February, 2015 on the ground that the said goods purchased by the Respondents were not their 'inputs' and hence the credit availed by them was irregular.
Page 3 of 14Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 2.2. The said notices were adjudicated by the Ld. Commissioner vide the impugned order wherein the proceedings initiated in the said three notices were dropped.
2.3. Aggrieved against the dropping of the demands, the Revenue has filed this appeal.
3. In their Grounds of Appeal, the Revenue has raised the following points:
a. It is contrary to the established principle of law that unless something new having distinct name, character and use emerges out of the processes undertaken on starting materials, it cannot be said that the taxable event of 'manufacture' has taken place. In the instant case, cast materials of particular name and nomenclature purchased were admittedly sold under the same name and nomenclature only putting them in sets in suitable packing. Processes namely, grinding and chipping for smoothening / levelling the surface, painting, crating carried out on the purchased cast materials did not lead to emergence of any new product having distinct name, character and use, and it was rightly alleged in the subject SCNs that there was no 'manufacture', and consequently, availment of CENVAT Credit on such purchased cast articles was irregular and liable for recovery. Adjudicating authority appears to have erred in his observation that processes are incidental or ancillary to the completion of manufacture to reach the articles as Customer's exact specification.Page 4 of 14
Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 b. It is an admitted position that the Respondents have purchased 'Rough Frames', 'Rough Covers', 'Rough Rings' and 'Rough Risers' and later sold them as 'Frames' and 'Covers' or 'Rings' and 'Risers' putting them up in sets (Para 6.4.3 of the O-in-O. refers). Therefore, there can be no doubt that no new product ever emerged in the processes undertaken in the factory. In that view of the matter, the finding of the Ld. Adjudicating Authority vide Para of 6.80 the Order-in-Original that the rough cast articles purchased and the final products made there from are two different items does not appear legally sustainable.
c. It was incorrect to accept the Respondent's plea that the cast articles purchased were not marketable until those were subjected to processes of grinding and chipping for smoothening /levelling the surface, painting, crating as were carried out by them in their factory. Fact remains that the Respondents themselves purchased the said cast articles before being put to the said processes, which clearly indicated that the subject cast materials purchased were very much marketable in the form they were removed. Therefore, the plea was erroneous, misleading and unacceptable. d. It was also incorrect to conclude that the subject materials were used 'in relation to manufacture and accordingly, CENVAT Credit was admissible. Firstly, it shows that it is an admitted position that the subject cast materials were not used 'in the manufacture' of the final products. Secondly, items which are usually considered to have been used in relation to the manufacture Page 5 of 14 Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 of any particular product are those which do not enter the manufacture stream themselves but abates and/or facilitates the manufacture of the final product. In the instant case the purchased items themselves were put up in sets and sold after grinding and chipping for smoothening / levelling their surface and after painting.
Therefore, these items can under no circumstances be said to have been used 'in relation to manufacture' of their final products as sought to be made out.
e. The Respondent's claim that the cast articles purchased were not as per the specification of the overseas buyer was ex-facie incorrect and unacceptable. Unless those were casted according to the dimensional requirement/ specification of the overseas buyer, those were of no use to the Respondent company. Accordingly, the said claim should have been out rightly rejected as incorrect. The processes carried out in their factory did not attract the definition of 'manufacture' as rightly alleged in the SCNs.
f. The Adjudicating authority appears to have erred in holding the SCN barred by limitation vide Para 6.14.0. of the Order-in-Original in as much as:
i) The SCN dated 29.3.14 covering the period March, 2013 to February, 2014 (Amount- Rs.
1,12,64,108/-) and the SCN dated 05.6.2015 covering the period March 2014 to February, 2015 (Amount-Rs.1,34,37,855/-) were issued within 1 year from the relevant date, and Page 6 of 14 Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 accordingly, those two SCNs should not have been held as barred by limitation;
ii) The ground taken by the Adjudicating authority that the department was in full knowledge of the entire process and also facts, was not sufficient for holding the demands as time barred. It is a well settled position of law that suppression of fact is not obliterated merely because the department acquired the knowledge of the irregularity. Reference may be drawn to Hon'ble Gujarat High Court's judgment in the case of Commr-vs-Neminath Fabrics Pvt. Ltd. reported in 2010 (256) ELT 369 (Guj) in this regard.
g. The case laws relied upon by the adjudicating authority are either not applicable in the particular factual background of the present case where it is clearly established / demonstrated that no new and distinctly different product have emerged out of the operations carried out by the Respondent, or were rendered in completely different perspectives. Further, the overwhelming and binding effect of a large number of Hon'ble Apex Court judgments laying down a consistent law that unless something new having distinct name, character and use emerges out of the processes undertaken on starting input materials, it cannot be said that the taxable event of 'manufacture' has taken place, would very much apply in this case and override any contra view in the matter.
Page 7 of 14Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 h. The following judgments of the Hon'ble Supreme Court are very much relevant and applicable in the present case:
(i) UOI-vs-Delhi Cloth Mills Co. Ltd. [1977 (1) ELT J199 (S.C.)]
(ii) Hyderabad Industries Ltd-vs- UOI [1995 (78) ELT 641 (S.C.)]
(iii) Hindustan Polymers-vs-CCE [1989 (43) ELT 165 (S.C.)]
(iv) Ujagar Prints -vs- UOI [1988 (39) ELT 493 (S.C.)] 3.1. In view of the above submissions, the Revenue prayed for setting aside the impugned order and allow their appeal.
4. The Respondents have filed Cross objections, wherein they have submitted the following points for consideration:
(i) The Respondent states that after receipt of the said Rough Article of Iron in their factory, it is subjected to processes such as (i) grinding,
(ii) Shot blasting, (iii) buffing, (iv) surface treatment, (v) chipping, (vi) assembling. (vii) painting, (viii) crating (packing), (ix) testing (tensile, dimensions etc.), (x) inspection, as per the specification of buyers and then it is exported out of the territory of India under Bond or under claim of rebate.
(ii) The activities carried out by the Respondent are in relation to manufacture of goods within the meaning of Sec.2(f) of the Central Excise Page 8 of 14 Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 Act and hence, CENVAT Credit is admissible as per Rule 2(k) of the CENVAT Credit Rules, 2004.
(iii) In terms of Rule 2(k) credit on all goods used "in relation to manufacture of final product would be admissible till the process of manufacture continues. In the instant case, the said Cast Articles of Iron were Rough and therefore the same were not marketable and were processed further to bring it into marketable state as per the specification of the overseas buyers and hence the processes employed by the Respondent falls within the ambit of Rule 2(k)/Sec.2(f).
(iv) In this regard, the Respondent relies on the following judgments -
• Flex Engineering Ltd. Vs. CCE [2012 (276) ELT 153 (SC)] • Tata Iron & Steel Co. Ltd., Vs. UOI [1988 (35) ELT 605 (SC)] • CCE Vs. Solaris Chemtech Ltd., [(2007) ELT 481 (SC)] • CCE Vs. Prem Conductors [2008 (222) ELT 145 (Tri-Ahmd.)] • Friends Auto Industries (Regd.) Vs. CESTAT [2014 (310) ELT 630 (P&H)] • CCE Vs. Powerica Ltd., [(2003) 152 ELT 87 (Tri.)] • CCE Vs. Alok Enterprises [(2010) 259 ELT 333 (Bom.)]
5. Heard both sides and perused the appeal records.
Page 9 of 14Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019
6. We observe that the Respondents purchased 'Rough Frames', 'Rough Covers', 'Rough Rings' and 'Rough Risers' from M/s. RB Agarwalla & Co. Pvt. Ltd. and availed CENVAT Credit of the duty paid by them on the said 'inputs'. They have undertaken processes such as grinding and chipping for smoothening / levelling the surface, painting, crating on the said 'inputs' and manufactured the final products namely, 'Frames' and 'Covers' or 'Rings' and 'Risers' putting them up in sets. The Respondent have cleared a major portion of their goods for export under rebate on payment of duty and the rest portion cleared for export under Bond as well as for home consumption on payment of duty.
6.1. In terms of Section 2(f) of Central Excise Act, 1944, "Manufacture" includes any process which is incidental or ancillary to the Completion of a manufactured product. As per proviso to Rule 2(k) of CENVAT Credit Rules, 2004, "input" means all goods used in the factory by the manufacturer of the final products. In the present case, we find that the 'Rough Frames', 'Rough Covers', 'Rough Rings' and 'Rough Risers' purchased by the Respondent were subjected to processes such as grinding and chipping for smoothening / levelling the surface, painting, crating etc to manufacture the final products namely, 'Frames' and 'Covers' or 'Rings' and 'Risers' putting them up in sets. Thus, the materials on which CENVAT Credit was availed by the Respondent were used 'in relation to' manufacture of dutiable final product. Accordingly, we hold that the Respondent has rightly availed the CENVAT Credit on the inputs, as the processes undertaken by them are incidental or Page 10 of 14 Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 ancillary to the manufacture of the resulting finished goods.
6.2. We also find that the Department has not objected when the Respondent has considered the processes undertaken by them as amounting to 'manufacture' and paid central excise duty on the finished goods at the time of clearance for exports as well as for home consumption.
6.3. We also observe that in a catena of decisions it has been held that though the process does not amount to manufacture, credit on inputs cannot be denied as the manufacturer paid duty on the final products. This view has been taken by the Tribunal at Mumbai in the case of Ajinkya Enterprises v. Commissioner of Central Excise, Pune-III [2013 (288) E.L.T. 247 (Tri. - Mum.)], wherein it was held as under: -
"6. We have considered the detailed arguments of rival sides. On perusal of records, we find that the undisputed fact in this case is that the appellants are engaged in the activity of de-coiling of HR/CR coils, cutting and slitting thereof into specific sizes as per design of their buyer and carrying out pickling and oiling thereon. It is also not disputed that as held by various judicial pronouncements that activity of de- coiling of HR/CR coils, cutting and slitting thereof into specific sizes and carrying out pickling and oiling thereon does not amount to manufacture. Therefore, the issue before us is that whether the CENVAT credit taken by the appellants on HR/CR coils which were cleared by them on payment of duty, after the process of de-coiling, cutting and slitting into specific sizes and thereafter carrying out pickling and oiling is required to be reversed or not.
7. The learned SDR submits that as per law, the appellants were required not to take CENVAT credit on these goods i.e. HR/CR coils as their activity does not amount to manufacture. Therefore, the CENVAT credit taken by them is wrong and in that event, they are required to reverse the CENVAT credit. He further submitted that the duty was paid without any authority of law. Therefore, the question of allowing Page 11 of 14 Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 the credit on input does not arise. He relies on the decision of Velere Power India Pvt. Ltd. (supra), wherein it was held by this Tribunal that CENVAT credit was taken wrongly and duty equal to CENVAT credit is required to be paid under Rule 3(5) of Cenvat Credit Rules when the activity does not amount to manufacture. In that case the assessee took the credit on the inputs and after processing of inputs, the final products were cleared on lower value. The activity did not amount to manufacture but the duty was paid less at the time of clearance of the goods at lower value although the CENVAT credit was taken more than the duty paid. Therefore, differential duty was asked to be paid. Therefore, we are of the view that the ratio laid down in the decision of Velere Power India (supra) supports the case of the appellant. This is not the fact in this case before us.
8. In the matter in hand before us, the appellants have paid more duty than the credit availed after value addition. Therefore, the decision of Velere Power India (supra) is not relevant to facts of this case. The learned SDR also relied on the decision of Metlex (I) Pvt. Ltd. (supra), wherein the Apex Court has held that merely because the party mistakenly filed the classification list, does not mean that he had to pay duty, even if he is not bound to pay duty. If there is no manufacture then mere the fact that the classification list has been filed would not make them liable to pay duty. We have seen the decision of Metlex (I) Pvt. Ltd. (supra). In that case the facts are that the assessee wrongly filed their classification list on the ground that their activity amounts to manufacture and paid duty thereon. The Hon'ble Apex Court held that this does not bar them when their activity, does not amount to manufacture and they have mistakenly filed the classification list on the understanding that their activity is amounting to manufacture. The Hon'ble Apex Court, therefore, held that the assessee is not barred from taking the plea of not amounting to manufacture when they have paid the duty on mistaken belief that their activity amounts to manufacture. Therefore, the said decision is also not relevant to facts of this case. The learned SDR, further, relied upon the case of Nicholas Piramal (supra), wherein the facts of the case are that whether the Tribunal was right in allowing the assessee for reversal of credit taken instead of insisting upon the assessee to pay the amount equal to 8%/10% of total price of exempted goods as per Rule 6(3)(b) of the Cenvat Credit Rules, 2002. In that case, the Hon'ble High Court held that if a manufacturer is using common input for dutiable as well as for exempted goods, in that case the assessee is required to make separate account of inputs which are going in manufacturing Page 12 of 14 Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 of dutiable goods and separate account for inputs which are going in manufacturing of exempted goods. But, in case the assessee does not maintain separate account of inputs, in that case the assessee is required to pay 8%/10% of the amount of exempted goods. In that scenario, the Hon'ble High Court held that the assessee is required to reverse 8%/10% of the amount. Therefore, the facts of that case are not relevant to the facts of this case.
9. We have seen from the facts of this case where as per Circular dated 7-9-2001, the activity of slitting of HR/CR coils into strip was amounted to manufacture. It is admitted fact that the said Circular was withdrawn on 2-3-2005. Thereafter, the appellants sought clarification through various letters to the department to clarify whether the composite activity of de-coiling of HR/CR coils, cutting and slitting into specific sizes and thereafter pickling and oiling amounting to manufacture or not. That was clarified only on 24-6-2010. In the case of Resistance Alloys (supra) and P.V. Sanghvi (supra), wherein it was held that process of pickling and oiling would not amount to manufacture, but in the case in hand before us, the appellants were undertaking composite activity of de-coiling of HR/CR coils thereafter cutting and slitting into specific sizes and after that pickling and oiling taken place, which was clarified by the department only on 24-6-2010 saying that the said activity does not amount to manufacture. Therefore, following instructions issued through Circular No. 911/1/2010-CX., dated 14-1-2010, the appellants approached to the Commissioner for issuance of appropriate rectification for regularization of the CENVAT credit availed as their activity does not amount to manufacture and they have paid duty on clearance of the goods more than the credit availed. The Commissioner has also considered the representation of the appellant and forwarded to the Board for issuance of the required notification. The Board has neither rejected the proposal of the Commissioner, nor issued the notification for regularization of credit availed. In that situation, we are of the view that the benefit of the Circular No. 911/1/2010-CX., dated 14-1-2010 is available to the appellants.
10. Further, it is the admitted fact that the appellants are the manufacturer of excisable goods also. Therefore, as per Rule 3(5) of the Cenvat Credit Rules, 2004, if the activity in question of the appellants does not amount to manufacture, the appellants are required to pay duty equal to credit taken on clearance of such inputs under cover of Central Excise invoices. As in this case, the activity of the appellants does not amount to manufacture, Page 13 of 14 Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019 therefore, these inputs are cleared as such. In that event, as per Rule 3(5) of Cenvat Credit Rules, 2004 the appellants are required to pay duty equal to the credit taken thereon and the appellants have paid duty more than the credit availed.
11. The learned Advocate also relied on several case laws, wherein it was held that when duty paid at the time of clearance equal to or higher than the credit availed, the same is to be treated as reversal of credit. Therefore, no further reversal of credit is required as held by this Tribunal in the case of Repro India Ltd. (supra), Punjab Stainless Steel Industries (supra), Drish Shoes Ltd. (supra), SAIL (supra). In this case, it is admitted fact that the department has accepted duty paid by the appellants on their clearances and as per judicial pronouncement in the case of Ashok Enterprises (supra), Super Forgings (supra), SAIL (supra), M.P. Telelinks Ltd. (supra), Creative Enterprises (supra) which was upheld by the Hon'ble Apex Court that once duty on final products has been accepted by the department in the case, CENVAT credit cannot be denied even if the activity does not amount to manufacture.
12. Therefore in view of the above discussion, we find that the duty paid by the appellants has been accepted by the department which is admittedly more than the CENVAT credit availed by the appellants. Therefore, following the various judicial pronouncements as discussed herein above, we hold that the appellants are not required to reverse the credit. Accordingly, the appeals are allowed with consequential relief."
7. Thus, in view of the above discussion and by relying on the decision cited supra, we hold that the Respondent has rightly availed the credit on the inputs and utilized the credit availed for the purpose of payment of duty at the time of clearance of the goods for export as well as for home consumption. Accordingly, we do not find any infirmity in the impugned order passed by the ld. adjudicating authority in dropping the proceedings initiated in the three Show Cause Notices.
Page 14 of 14Appeal No.: E/75493/2016-DB & Cross Obj. No.: E/CO/75498/2019
8. In the result, we uphold the impugned order passed by the ld. adjudicating authority and reject the appeal filed by the Revenue. The cross objection filed by the Respondent is also disposed of in the above manner.
(Operative part of the order was pronounced in open court) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd