Where an assessee utilizes CENVAT credit to pay duty on a final product, the credit is effectively reversed, and the Department cannot separately recover the credit even if the manufacturing process is later determined to be non-dutiable.

S. S. GARG :

The present appeal is filed by the Revenue against the impugned Order-in-Original dated 31.07.2019 passed by the Commissioner of Central Excise & CGST, Rohtak, whereby the learned Commissioner has set aside the demands raised in two Show Cause Notices.

2. Briefly stated facts of the present case are that the Assessee/Respondent, M/s Dharam Industries (in short ‘DI’), were registered with the Central Excise Department and were engaged in the business of manufacturing of Stainless Steel (‘S.S.’) products like S.S. Sheets/Coils and Stair/Furniture, Railings etc classified under Chapters 72199013 & 73089090 of the Central Excise Tariff Act, 1985. The Respondent had been availing the facility of CENVAT Credit under the Cenvat Credit Rules, 2004.

2.1 During the scrutiny of ER-1 Returns for the period December 2014 to March 2016 and April 2016 to June 2017, the Department observed that the Respondent after polishing and pasting paper or adhesive plastic film on S.S. Sheets/Coils, were clearing the same on payment of central excise duty. It was further observed by the Department that the Respondent were also availing CENVAT Credit of duty paid on raw materials such as S.S. Sheets/Coils. As per the Department since no new product emerged from the process undertaken by the Respondent, no manufacture had taken place and therefore CENVAT Credit availed was not admissible.

2.2 Consequently, two Show Cause Notices (‘SCNs’) dated 03.01.2017 and 06.03.2018 were issued to the Respondent for the period December 2014 to March 2016 and April 2016 to June 2017 respectively, demanding recovery of the CENVAT Credit cumulatively amounting to Rs.4,72,60,648/- along with applicable interest and penalties.

2.3 The Respondent filed detailed reply to the said SCNs and submitted that: (a) the process undertaken by the Respondent resulted in a commercially new product having distinct characteristics and hence amounting to manufacture; (b) no investigation was carried out by the Department to find out the commercial significance of differently surfaced S.S. Sheets/Coils namely satin finish no.4 or mirror finish no.8 and PVD coated; (c) the excise duty was paid at the time of clearance of goods and as such no revenue loss was suffered by the Department; (d) in an identical matter for the previous period November 2011 to March 2012, the Commissioner (Appeals) had granted relief to the Respondent, and (e) extended period was not invokable, as there was no allegation of suppression or fraud or wilful mis-statement and the fact of availment of CENVAT Credit was known to the Department beforehand.

2.4 After following the due process, the learned Adjudicating Authority vide the impugned Order-in-Original, held that the process undertaken by the Respondent did not constitute manufacture but since excess duty was paid by the Respondent through PLA, CENVAT Credit availed stands more than reversed and hence, no further reversal or recovery was necessary. The learned Adjudicating Authority also relied upon several decisions of the Tribunal, the High Courts and the Supreme Court to support his contentions. Aggrieved by the said Order-in-Original, the Revenue is in appeal before us.

3. Heard both the parties and perused the material on record.

4. The learned Authorized Representative for the Appellant/Revenue submits that the impugned order passed by the learned Commissioner is not sustainable in law as the same has been passed without properly appreciating the facts and the law and correct appreciation of Cenvat Credit Rules.

4.1 She further submits t