2016 (2) TMI 591 - AT - Central Excise

Cenvat Credit on semi finished / unformed batteries denied - Whether the activity undertaken by the appellant on amounts to manufacture or not? - Held that - Semi finished / incomplete batteries received by the appellant and by the process undertaken by the appellant have become complete batteries / marketable. Therefore, the activity undertaken by the appellant is squarely covered by the section note 6 of Section 16 of Tariff Act 1985. Therefore, we hold that activity undertaken by the appellant amounts to manufacture. Therefore, they have rightly taken the Cenvat Credit on semi finished / incomplete batteries received from their sister unit to do the process making them marketable in complete condition. The appellant has succeeded on the issue that whether their activity amounts to manufacture or not. We also hold that as per the decision of Hon ble High Court in the case of Ajinkya Enterprises (2012 (7) TMI 141 - BOMBAY HIGH COURT ) wherein it has been held that if activity does not amount to manufacture, the goods cleared on payment of duty shall amount to reversal of credit. In that situation also appellant is not required to reverse Cenvat Credit. In these circumstances, the appellant has correctly taken the Cenvat Credit and we do not find any merit in the impugned order. - Decided in favour of assessee

Summary

Issues:
1. Whether the activity undertaken by the appellant amounts to manufacture.
2. Whether the appellant is entitled to take Cenvat Credit on semi-finished batteries.
3. Whether clearing goods on payment of duty amounts to reversal of Cenvat Credit.

Analysis:

Issue 1: Activity Amounting to Manufacture
The appellant, a manufacturer of electric accumulators, procured semi-finished and unformed batteries from sister units. They poured sulfuric acid, charged the batteries, and cleared them as final products on duty payment. The Revenue contended that the appellant was merely selling batteries received from sister units, not engaging in manufacturing. The appellant argued that their activities, including electrolytic filling and jar formation, transformed the batteries into marketable products. The Tribunal examined the process and Section 16 of the Central Excise Tariff Act 1985. It concluded that the appellant's activities fell under the definition of manufacture as per the Act, making them eligible for Cenvat Credit on semi-finished batteries.

Issue 2: Entitlement to Cenvat Credit
The Tribunal held that the appellant had correctly availed Cenvat Credit on semi-finished batteries, as their activities transformed the incomplete batteries into marketable products. The appellant's process aligned with Section 16 of the Tariff Act, justifying their entitlement to the credit. The Tribunal referenced a High Court decision to support the appellant's position, emphasizing that clearing goods on duty payment did not necessitate reversal of Cenvat Credit in this scenario.

Issue 3: Reversal of Cenvat Credit
Considering the appellant's activities as amounting to manufacture, the Tribunal ruled that the appellant's clearance of goods on duty payment did not require the reversal of Cenvat Credit. The Tribunal found no merit in the Revenue's arguments and set aside the impugned order, allowing the appeal with consequential relief, if any. The decision was pronounced in favor of the appellant, affirming their right to Cenvat Credit on the transformed batteries and rejecting the Revenue's contentions regarding manufacturing and duty payment implications.