By TIOL News Service

MUMBAI, AUG 01, 2017: THE appellant is carrying out the activities of Segregation of Shredded mixed metal falling under various Chapters.

The SCN alleges that the process of segregation of scrap cannot be treated as manufacturing activity specified under Section 2(f) of CEA, 1944 and, therefore, the appellant is not entitled to take CENVATCredit. Rule 6(1) of CCR is adverted to.

The lower authorities confirmed the demand and imposed penalty, interest.

In appeal before the CESTAT the appellant submitted that they had cleared the goods (viz. segregated scrap) on payment of duty, therefore, the same cannot be treated as exempted goods. Furthermore, once the duty payment on the said final product is not under dispute,CENVATcredit on the inputs also cannot be disputed. Also, since the appellant is a 100% EOU and as per the export import policy even segregation of scrap amounts to manufacture, the availment of credit cannot be questioned.The appellant also cites the following decisions in support - Creative Enterprises - 2008-TIOL-784-HC-AHM-CX , Ajinkya Enterprises - 2012-TIOL-578-HC-MUM-CX, Polyrub Extrusion - 2014-TIOL-1867-CESTAT-MUM & ANZ International - 2009-TIOL-40-HC-KAR-CX .

The AR reiterated the findings of the impugned order.

After considering the submissions, the Bench held –

"5. I find that lower authorities have denied the Cenvat credit only on the ground that segregation of scrap carried out by the appellant is not amount to manufacture. However, it is not under dispute that segregation of scrap was sold on payment of duty in the domestic market. Once the excise duty has been paid on the final product and same is not under dispute Cenvat credit on the input stage cannot be denied. For this reason itself, appellant is entitled for the Cenvat credit. This view is supported by decisions cited by the learned counsel. Moreover, as per rule 16 of Central Excise Rules, 2002, even if activity is not amount to manufacture, the assessee is entitle to take credit on the input and at the time of clearances of the said goods excise duty is required to be paid equivalent to amount of Cenvat credit. In the fact of the present case, it is not disputed that appellant have cleared the goods on payment of duty therefore, in terms of Rule 16 also appellant is entitle for the Cenvat credit…"

The impugned order was set aside and the Appeal was allowed.

(See 2017-TIOL-2692-CESTAT-MUM)