2007 (3) TMI 40 - AT - Central Excise

Cenvat/Modvat Department contended that the activities undertaken by the appellant on returned good does not amount to manufacture - Assessee has deposited the duty by considering it manufacture Held that appellant liable for credit

Summary

Issues: Violation of Central Excise Rules, Duty Demand, Penalty Imposition, Manufacture Activity

Violation of Central Excise Rules:
The case involves an appeal where the assessee, engaged in manufacturing PVC Gasket Frames, faced allegations of violating Central Excise Rules, particularly Rule 16(2) of the Central Excise Rules, 2001. The Department claimed that the assessee did not follow the prescribed procedure, leading to a duty demand of Rs. 1,26,843, along with interest and penalty. The appellant had availed credit of duty on goods returned by customers, which the Department contested as not meeting the manufacturing criteria. However, the Tribunal noted that the duty was paid and accepted by the Revenue during the second clearance, making the activity revenue-neutral. The Tribunal relied on a Supreme Court decision to support the appellant's position, emphasizing that if the activity did not amount to manufacture, the duty paid should be refunded. Consequently, the Tribunal set aside the impugned order in favor of the appellant, highlighting the revenue-neutral nature of the situation.

Duty Demand and Penalty Imposition:
The Department confirmed a duty demand of Rs. 1,26,843 against the appellant for allegedly violating Central Excise Rules and imposed an equal amount of penalty along with appropriate interest. However, the Tribunal found that the appellant had paid the duty during the second clearance, which was accepted by the Revenue. The Tribunal emphasized that if the Department believed the activity did not constitute manufacturing, the duty paid should be refunded to the appellant. As there was no loss of revenue to the Department due to the appellant's actions, the Tribunal allowed the appeal, indicating that the benefit should be extended to the appellant based on the principles of neutrality and fairness.

Manufacture Activity:
The appellant, involved in manufacturing PVC Gasket Frames using PVC Gasket and Ferrite Magnets as raw materials, faced allegations from the Department regarding the manufacturing process and duty payment. Customers returned the cleared PVC Gasket Frames to the appellant, who then separated the components for reassembly. The Department contended that the appellant's activities did not align with the Central Excise Rules, resulting in duty demand, interest, and penalty imposition. However, the Tribunal reasoned that since the duty was paid and accepted during the second clearance, the Department could not now argue that the activity did not amount to manufacturing. Citing a Supreme Court decision, the Tribunal emphasized the need for a revenue-neutral approach and ruled in favor of the appellant, setting aside the impugned order and disposing of the miscellaneous application.