2007 (5) TMI 130 - AT - Central Excise

Manufacture -Alleged that appellant activity of processing to increase the purity of purchase input Gamma Acid not amount to manufacture and also not entitle for credit and it is accepted - Assessee claim that availed credit reversed before export the impugned good - Matter remanded to verify assessee claim

Summary

Issues:
- Whether the process of purification undertaken by the respondent company amounts to manufacture enabling them to take Cenvat credit.
- Whether the purification of Gamma Acid falls under Chapter Heading 2922.00.
- Whether the credit taken has been reversed before exporting the final product.

Analysis:
The respondent company purchased input Gamma Acid of 90% purity and enhanced it to 93 to 97% purity through standardizing and blending processes to meet overseas buyers' requirements. They claimed this purification process as manufacturing and took Cenvat credit on the inputs. The key issue is whether this purification process qualifies as manufacture for Cenvat credit during October/November 1994. The department argued that since both the input and output fall under the same chapter heading, the process does not amount to manufacture. The Tribunal noted the absence of a specific provision treating purification under Chapter 2922.00 as manufacture, thus supporting the department's stance.

The Tribunal acknowledged the respondent's claim that the entire purified Gamma Acid was exported under the Vabal Scheme, and they reversed the credit before exporting. If the credit reversal indeed occurred, it would result in a revenue-neutral exercise. Considering this claim, the Tribunal set aside the Commissioner (Appeals) order and remanded the matter to verify whether the credit for Gamma Acid inputs was reversed before or at the time of exporting the final product. If this claim is substantiated, no demand would remain.

In conclusion, the Tribunal allowed the appeal by way of remand, emphasizing the importance of verifying the credit reversal claim before finalizing any demand. The judgment highlights the significance of compliance with Cenvat credit procedures and the need for thorough documentation to support claims of credit reversal before export to ensure a revenue-neutral position for the company.