2015 (1) TMI 1040 - AT - Central Excise

Cenvat credit - Colour Picture Tubes (CPT) are cleared on payment of duty - Re-manufacture and re-making of tubes - Held that - Defective CPTs, which had earlier been cleared on payment of duty, had been received back in the factory for being re-made in the terms of the provisions of Rule 16 of the Central Excise Rules, 2002. From the records, it is clear that the defective CPTs received back had been dismantled and thereafter by using salvaged parts and fresh parts, the entire process of manufacturing is undertaken on the same production line. The fresh CPTs made had been cleared on payment of duty. Under the provisions of Rule 16 of the Central Excise Rules, 2002, when duty paid goods are returned to the factory of manufacture, for being repaired, remade, refined, reconditioned, etc., the manufacturer take the cenvat credit of the duty originally paid and thereafter in terms of provisions of sub-rule (2), at the time of clearance of the repaired/remade goods, if the process undertaken does not amount to manufacture, he is required to pay the duty amount equal to the cenvat credit taken, but if the process amounts to manufacture, he is required to pay the duty chargeable on the goods at the rate applicable on the date of removal and on the value determined under the provisions of Section 3(2), Section 4 or Section 4 A, as the case may be. There is no provisions in Rule 16 that Cenvat credit in respect of the inputs used in the process of repairing/refining would not be available. Appellant had disclosed the process undertaken by them as early as in the month of May, 2001 in respect of the defective CPTs received from their customers and hence, the department cannot allege suppression of facts saying that the appellant had not disclosed that they were taking Cenvat credit on the inputs used in re-making of the goods. In view of this, there is merit in the appellant plea. In these circumstances, I hold that the appellant has correctly availed the Cenvat credit on input and the same cannot be denied - Decided in favour of assessee.

Issues:
1. Availing of Cenvat credit on inputs used in re-manufacturing of Colour Picture Tubes (CPT)
2. Dispute regarding whether re-making of CPTs amounts to manufacture
3. Allegation of suppression of facts by the department
4. Application of Rule 16 of the Central Excise Rules, 2002

Issue 1: Availing of Cenvat credit on inputs used in re-manufacturing of Colour Picture Tubes (CPT):
The appellant availed Cenvat credit of duty paid on inputs used in or in relation to the manufacture of picture tubes. The department alleged that since some Cenvat credit availed parts/inputs were used in the re-making of the CPTs, and re-making does not amount to manufacture, the appellant should not be entitled to Cenvat credit for the fresh parts used. A show cause notice was issued seeking recovery of the allegedly wrongly taken Cenvat credit. The original adjudicating authority confirmed the demand, along with interest and penalty. The appellant contended that as per Rule 16 of the Central Excise Rules, 2002, they were entitled to take Cenvat credit on inputs used in the process of repairing/remaking. The Tribunal held that the appellant had correctly availed the Cenvat credit on inputs used in re-manufacturing of the CPTs.

Issue 2: Dispute regarding whether re-making of CPTs amounts to manufacture:
The department argued that the process undertaken by the appellant in re-making the defective CPTs did not amount to manufacture. They relied on previous Tribunal judgments to support their contention. However, the appellant cited Tribunal judgments in similar cases where re-making of defective goods after dismantling them and using salvaged parts was considered as manufacture. The Tribunal found merit in the appellant's argument and held that the process of re-making the CPTs amounted to manufacture, thus justifying the availing of Cenvat credit on fresh parts used.

Issue 3: Allegation of suppression of facts by the department:
The department alleged suppression of facts by the appellant regarding the availing of Cenvat credit on inputs used in re-making the goods. However, the Tribunal noted that the appellant had disclosed the process undertaken as early as May 2001, in respect of the defective CPTs received from customers. Therefore, the department's claim of suppression of facts was dismissed, and the appellant's disclosure was considered timely and sufficient.

Issue 4: Application of Rule 16 of the Central Excise Rules, 2002:
The Tribunal analyzed the provisions of Rule 16, which allow manufacturers to take Cenvat credit of duty originally paid on goods returned for repair, remaking, etc. The rule specifies that if the process undertaken amounts to manufacture, the manufacturer must pay the duty chargeable on the goods at the applicable rate. The Tribunal found that Rule 16 did not prohibit the availing of Cenvat credit on inputs used in the process of repairing/remaking. Based on the interpretation of Rule 16 and relevant Tribunal judgments, the Tribunal set aside the impugned order, allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, holding that they correctly availed the Cenvat credit on inputs used in re-manufacturing the Colour Picture Tubes. The Tribunal determined that the process of re-making the CPTs constituted manufacture, as supported by Rule 16 and relevant Tribunal precedents. The allegation of suppression of facts was dismissed, and the appellant's disclosure was deemed timely. The impugned order was set aside, and the appeal was allowed with consequential relief.

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