2013 (8) TMI 841 - AT - Central Excise

Entitlement for MODVAT Credit - Appellant was manufacturer of Diodes and Transistors classifiable under sub-heading 8541.00 of Central Excise Tariff Act, 1985 The Department was of the view that 90,000 pieces of Diodes Cell Type un-marked (imported) involving Cenvat credit were finished product and not entitled to avail modvat credit in respect of those pieces - Held that - Cenvat credit was rightly availed by the respondent - The jurisdictional adjudicating authority had looked into the process the imported semi-finished diodes were subjected to make them marketable to conclude that the process amounts to manufacture of the finished product and it also amounts to value addition to the semi-finished diodes - There were no contravention of provisions of Rules 51A, 57G, 57F(1), 173(1) and 173G of Central Excise Rules, 1944. The diodes seized by the department were per se not marketable and respondent after processing those semi-finished diodes used to clear the same on payment of excise duty - it was evident that the adjudicating authority had looked into the process to which imported semi-finished diodes were subjected to before marketing the same came to the conclusion that the aforesaid process amount to manufacture as defined under Section 2(f) of Central Excise Act, 1944 - Only fact which was established from the test report was that diode action was observed in the sample at the time of testing - The report does not answer the question as to whether or not the sample could have been used as diodes in electronic equipment nor it answer that the assessee was to required the subject imported semi-finished diodes to further process to convert into the value added finished product - the test report in the absence of any other evidence was of no avail to the Department as such order cannot be sustained Decided against Revenue.

Summary

Issues:
Appeal against dismissal of duty demand due to modvat credit wrongly availed.

Analysis:
The case involved an appeal against an order by the Commissioner (Appeals) dismissing the Department's appeal regarding modvat credit wrongly availed by the respondent. The dispute arose when 90,000 pieces of imported diodes were found during a physical verification at the respondent's manufacturing unit. The Department alleged that these diodes were finished products, not semi-finished as declared by the respondent. Consequently, a show cause notice was issued in 1997 raising a duty demand of Rs. 37,260. The adjudicating authority dropped the proceedings, which was upheld by the Commissioner (Appeals), leading to the Department's appeal before the Tribunal.

The appellant argued that the diodes were finished products misdeclared as semi-finished by the respondent, supported by a test report indicating characteristics of a complete diode. On the other hand, the respondent contended that the diodes were indeed semi-finished goods processed further to become marketable finished diodes. The Commissioner (Appeals) agreed with the respondent's position.

Upon review, the Tribunal found that the imported diodes underwent processes making them marketable, constituting manufacturing as per Central Excise Act, 1944. The test report cited by the Department did not conclusively prove the diodes were finished products, as it only confirmed diode action without addressing their usability in electronic equipment without further processing. Consequently, the Tribunal dismissed the appeal, emphasizing the lack of merit in challenging the lower authorities' decisions based solely on the test report.

In conclusion, the Tribunal upheld the lower authorities' findings, determining that the respondent rightfully availed Cenvat credit for semi-finished diodes processed into marketable finished products. The appeal against the duty demand was dismissed due to insufficient evidence establishing the diodes as finished goods, as indicated by the test report's limitations.