2007 (5) TMI 45 - AT - Central Excise

Cenvat/Modvat Alleged that testing and packing not amount to manufacture and the appellants had exported the inputs as such procured from job worker and it not eligible for credit on such export Held that credit not denied

Summary

Issues:
- Demand of Cenvat credit availed by the appellants on automotive parts manufactured and cleared by their Foundry Division.
- Whether testing and packing of goods amount to manufacture for the purpose of availing Cenvat credit benefit.
- Interpretation of Rule 16 of the Central Excise Rules, 2002 and Notification No. 43/01-C.E. (NT.) in relation to availing credit of duty paid on goods exported.
- Admissibility of Cenvat credit on goods received from job workers without undergoing a process of manufacture.

Analysis:

Issue 1: Demand of Cenvat credit on automotive parts:
The appeals sought to set aside impugned orders demanding Cenvat credit availed by the appellants on automotive parts manufactured and cleared by their Foundry Division. The Commissioner and Commissioner (Appeals) had demanded specific amounts and imposed penalties on the appellants for availing the said credit.

Issue 2: Testing and packing as manufacturing processes:
The main contention was whether testing and packing of goods constituted manufacturing processes for the purpose of availing Cenvat credit benefit. The appellants argued that these processes were essential finishing steps before export, ensuring quality and marketability of the goods. They relied on case law and statutory provisions to support their claim.

Issue 3: Interpretation of Central Excise Rules and Notifications:
The appellants cited Rule 16 of the Central Excise Rules, 2002 and Notification No. 43/01-C.E. (NT.) to argue that they were entitled to take credit of duty paid on goods received from job workers even if the processes of testing and packing did not amount to manufacture. They emphasized that they had followed the prescribed procedures for export under bond.

Issue 4: Admissibility of Cenvat credit on goods received from job workers:
The department contended that the appellants had exported goods without undergoing any process of manufacture, making the availed credit inadmissible under Cenvat Credit Rules. The department's case was based on the premise that the inputs did not undergo any manufacturing process before export.

Judgment:
After considering the arguments and case records, the Tribunal found that the appellants had undertaken significant manufacturing activities on the inputs received from job workers, including testing and packing, before exporting the goods. The Tribunal held that the processes undertaken by the appellants amounted to manufacture as defined in the Central Excise Act. The goods became fully manufactured before export, justifying the availed Cenvat credit. The Tribunal also noted that the department had allowed the export under bond and acquiesced in the appellants' treatment of the packed automotive parts as manufactured goods. Consequently, the impugned orders demanding Cenvat credit, interest, and penalties were set aside, and both appeals were allowed.

Conclusion:
The judgment clarified that the testing and packing of goods constituted manufacturing processes for availing Cenvat credit benefit. The Tribunal's decision emphasized the completion of manufacturing activities by the appellants before export, justifying the admissibility of the availed credit. The interpretation of relevant rules and notifications supported the appellants' position, leading to the setting aside of the impugned orders and the allowance of both appeals.