2004 (10) TMI 371 - AT - Central Excise

Summary

Issues: Modvat credit reversal on removal of input; Whether conversion of Stainless Steel Coiled Sheets into defective Cabinets amounts to "manufacture".

Analysis:
1. The case involved five appeals by the Revenue concerning the removal of rejected Washing Machine Cabinets as Scrap, leading to demands for reversal of Modvat credit on Pre-painted Stainless Steel Coiled Sheets used as inputs. The Department argued that the removal of Cabinets constituted removal of input as such, necessitating credit reversal under Rule 57-I. The assessee contended that only Steel Scrap was removed, not the original input, and thus credit reversal was unwarranted. The Commissioner (Appeals) allowed the appeals, prompting the Revenue's challenge.

2. The main contention revolved around whether the conversion of Stainless Steel Coiled Sheets into defective Cabinets constituted "manufacture" under Section 2(f) of the Central Excise Act. The Revenue relied on the U.O.I. v. J.G. Glass Industries Ltd. case to assert that the conversion did not meet the manufacturing threshold. In contrast, the respondents defended the impugned order, citing Tribunal decisions in similar cases. The critical finding unchallenged in the appeals was that the rejected output did not involve the removal of inputs as such, as acknowledged by the Revenue. This acknowledgment undermined the basis for the demand for credit reversal under Rule 57-I, as it was premised on the incorrect assumption of input removal.

3. The Tribunal affirmed the Commissioner (Appeals)'s decision, emphasizing that the rejected Cabinets did not entail the removal of the original input. Given the Revenue's tacit acceptance of this factual finding, the demand for credit reversal could not be sustained. The judgment underscored that no reliance on case law was necessary to reach this conclusion. Consequently, the appeals by the Revenue were dismissed, upholding the impugned order and rejecting the demands for Modvat credit reversal.