2017 (10) TMI 1184 - AT - Central Excise

Refund of unutilized CENVAT credit - part refund denied on the ground that the fabric on which deemed credit availed by the appellant has not undergone the process of manufacturing in terms of Section 2(f) of CEA, 1944 - Held that - the appellant have carried out the process of cutting, folding, packing etc. for the purpose of export of such goods on job work basis on behalf of principal M/s S.V. Business Pvt. Ltd. Therefore the process carried out by the appellant is only remaining part of the overall manufacturing process, partly carried by their principal and partly by them. Therefore the refund under Rule 5 cannot be denied on the ground that process alone of the appellant is not amount to manufacture. Even if input is not used directly by the manufacturer of final product declared in the notification but are contained in the said final product deemed credit of input is admissible. Therefore the input which was used by the principal for manufacture of processed fabrics, the appellant is entitled for the deemed credit, it is also admitted fact that the final goods was cleared for export by the appellant. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim under Rule 5 regarding accumulated CENVAT credit on fabric; Whether the activities carried out amount to manufacture; Entitlement of deemed credit under Notification No.6/2002-CE(NT).

Analysis:
The appellant filed a refund claim under Rule 5 for accumulated CENVAT credit on fabric, availed as deemed credit under Notification No.6/2002-CE(NT). The Adjudicating Authority and the Commissioner (Appeals) rejected the claim, stating that the fabric did not undergo manufacturing as per Central Excise Act. The appellant appealed to CESTAT Mumbai, which remanded the matter to ascertain if the activities constituted manufacture. The Adjudicating Authority, in a subsequent order, again rejected the claim, leading to an appeal before the Commissioner (Appeals), who upheld the rejection, prompting the appellant to approach CESTAT Mumbai.

The appellant argued that the activities performed, such as cutting, ironing, folding, and packing, on the received fabric constituted manufacturing, justifying the refund claim under Rule 5. The Revenue contended that the appellant, having received processed fabric, was not entitled to deemed credit as per the notification, and that the activities did not amount to manufacture. The Tribunal previously remanded the matter to determine if other activities constituted manufacturing, which the appellant failed to prove.

The Tribunal analyzed the submissions and records, concluding that the appellant's activities were part of the overall manufacturing process, involving cutting, folding, and packing for export on behalf of a principal. The Tribunal highlighted Rule 11 of the CENVAT Credit Rules, allowing deemed credit even if inputs are not directly used by the manufacturer of final products. The Tribunal found that the appellant, having cleared final goods for export, was entitled to deemed credit as per the notification's terms.

Moreover, the Tribunal held that even if the appellant's activities did not individually amount to manufacture, the refund under Rule 5 could not be denied, citing precedents from the Madras High Court and Chennai Tribunal. Consequently, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal for the refund claim of accumulated credit under Rule 5 of the CENVAT Credit Rules, 2004.

In conclusion, the Tribunal found the appellant legally entitled to the refund claim based on the activities performed and the provisions of Rule 11, ultimately overturning the previous rejections and granting the appeal on 27.10.2017.