2017 (6) TMI 203 - AT - Central Excise

CENVAT credit - appellant have received the duty paid files from the other unit and thereafter the same was exported along with own manufactured files - whether the appellant are entitled for the cenvat credit on the duty paid goods received and resold for the purpose of export in terms of Rule 16? - Held that - whether any activity is carried out or otherwise if the activity does not amount to manufacture, the credit is admissible in terms of Rule 16 of Cenvat Credit Rules, 2002 - even though the appellants have not carried out any activity but the goods were cleared as such they are entitled for the cenvat credit in terms of Rule 16 - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of cenvat credit on duty paid goods received and resold for export under Rule 16 of Cenvat Credit Rules, 2002.

Analysis:
The case involved the appellants engaged in manufacturing files under chapter 8203 1000, who received duty paid files from another unit and exported them along with their own manufactured files. The dispute arose when the department disallowed the cenvat credit availed on the received goods, claiming they were finished goods and not inputs. The Commissioner (Appeals) upheld this decision. The main contention was whether the appellants were entitled to cenvat credit under Rule 16 despite not carrying out any manufacturing activity on the received goods.

The appellant's representative argued that Rule 16 allows for the receipt of duty paid goods for reasons beyond manufacturing activities like repairing or reconditioning. They cited various judgments to support their claim. On the other hand, the revenue's representative reiterated the findings of the impugned order, emphasizing that Rule 16 only permits receiving duty paid goods for specific activities like repairing, which were not conducted by the appellants in this case.

Upon careful consideration, the judge analyzed Rule 16, which allows the receipt of duty paid goods for any reason, not limited to manufacturing activities. The rule specifies that if no manufacturing activity is conducted, the manufacturer must pay an amount equal to the cenvat credit taken at the time of clearance. The judge concluded that since the appellants' case did not involve any activity amounting to manufacture, they were entitled to cenvat credit under Rule 16, even though the goods were cleared without any additional manufacturing process. The judge also addressed the revenue's allegation of excess duty payment, stating that if there was an issue with rebate claim, the department should have taken separate action. Ultimately, the impugned order disallowing the cenvat credit was set aside, and the appeal was allowed.