2016 (12) TMI 909 - AT - Central Excise

Manufacture - bought-out items like tubings, FRP Rods, Adhesive, Mastic tapes etc. are cleared as insulating fittings under sub-heading 8547.00 - period involved in the present case is July 2003 to March 2004 - whether the activity of bought out items cleared as cable jointing kits is a manufactured goods, and if not whether the Cenvat Credit on the bought out items is admissible for non manufacturing activity? - Held that - On the plain reading of Rule 16 of the Central Excise Rules, it can be seen that on the bought-out items credit can be availed and if the activity is not amount to manufacture on the clearance of the same duty is required to be paid equal to the cenvat credit availed on such bought out items. In view of the above Rule even though if it is admitted that the activity of the appellants is not amount to manufacture, as regard the clearance of cable jointing kits the cenvat credit availed by the appellants is not incorrect - In view of the provisions of Rule 16 of the Rule, in our considered view the appellant s act of availing the Cenvat Credit in respect of bought out items i.e. Cable Jointing Kits is clearly admissible. The impugned order is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of Cenvat Credit on bought-out items used in manufacturing cable jointing kits.
- Whether the activity of bought-out items cleared as cable jointing kits amounts to manufacturing.
- Applicability of Rule 16 of the Central Excise Rules on the case.

Analysis:
1. Admissibility of Cenvat Credit: The appellants, manufacturers of compounds and insulating fittings, were availing Cenvat Credit. The Revenue contended that bought-out items in cable jointing kits did not undergo a manufacturing process, making the kits non-excisable. The adjudicating and appellate authorities upheld this view. However, the appellants argued that Cenvat Credit was allowed previously when duty was paid on the kits. The Tribunal noted a previous decision supporting this argument, indicating a precedent for allowing the credit.

2. Manufacturing Activity: The crucial issue was whether the activity involving bought-out items cleared as cable jointing kits constituted manufacturing. The Tribunal examined Rule 16 of the Central Excise Rules, which allows credit on goods brought to the factory for re-making or re-conditioning. If the process does not amount to manufacturing, the manufacturer must pay an amount equal to the credit taken. The Tribunal concluded that even if the activity did not amount to manufacturing, the availed Cenvat Credit on the bought-out items for cable jointing kits was permissible under Rule 16.

3. Applicability of Rule 16: The Tribunal emphasized the relevance of Rule 16 in determining the admissibility of Cenvat Credit. It clarified that the Supreme Court decision cited by the Revenue was not applicable as Rule 16 was not in force during the period in question. By interpreting Rule 16, the Tribunal found that the appellants' act of availing Cenvat Credit for bought-out items in cable jointing kits was justifiable. Consequently, the impugned order was set aside, and the appeals were allowed, highlighting the importance of Rule 16 in such cases.

In conclusion, the judgment addressed the admissibility of Cenvat Credit on bought-out items used in manufacturing cable jointing kits, clarified the manufacturing activity involved, and underscored the significance of Rule 16 of the Central Excise Rules in determining such matters. The decision provided a detailed analysis of the legal provisions and precedents to support the appellants' position, ultimately allowing the appeals and setting aside the impugned order.