2017 (12) TMI 268 - AT - Central Excise

CENVAT credit on returned goods - Rule16 (1) of Central Excise Rules, 2002 - the appellant on the returned goods carried out the processes such as straightening, dimension checking heat treatment, lacquer quoting etc, whether theses process amounts to manufacture? - Held that - it cannot be accepted that the appellant have carried out any other process such as galvanizing and redrawing of the pipe. In absence of these process whatever process carried out it does not amount to manufacture - in terms of Rule 16(2) of the Rule, the appellant on the process not being manufacture required to pay duty equivalent to the amount of cenvat credit availed at the time of receipt of returned goods. The process does not amount to manufacture, therefore the differential duty demand is sustainable - Since the issue of short payment of duty was raised by the audit party there is a clear suppression of fact on the part of the appellant as the fact that what credit was availed and whether the same was paid or otherwise, was not disclosed to the department - demand with interest and penalty upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Differential duty demand based on Rule 16(1) of Central Excise Rules, 2002.
2. Whether the processes carried out by the appellant amount to manufacture.
3. Evidence of additional processes like galvanizing and redrawing not produced by the appellant.
4. Suppression of facts leading to the demand along with interest and penalty.

Analysis:
1. The appellant received defective pipes, carried out various processes, and cleared them on payment of duty. A show cause notice was issued for the differential duty based on Rule 16(1) of Central Excise Rules, 2002. The order for recovery of interest and penalty was imposed. The appellant filed an appeal before the Commissioner, which was rejected, leading to the current appeal.

2. The appellant argued that the processes carried out, including galvanizing and redrawing, amount to manufacture as per Chapter Note No.3 & 4 of Chapter 73. The appellant relied on several judgments to support their claim. However, the Revenue contended that the processes did not amount to manufacture as the defective pipes were simply rectified and returned. The absence of evidence of additional processes like galvanizing and redrawing was highlighted by the Revenue.

3. The Tribunal found that the processes carried out by the appellant, such as straightening, dimension checking, heat treatment, and lacquer coating, did not amount to manufacture. The claim of carrying out additional processes like galvanizing and redrawing was not supported by evidence. Without evidence of these processes, the Tribunal concluded that the differential duty demand was justified under Rule 16(2) of the Rule.

4. The Tribunal upheld the impugned order, stating that the appellant had suppressed facts regarding the short payment of duty, leading to a clear suppression of facts. The demand, along with interest and penalty under Section 11AC, was deemed sustainable due to this suppression. The Tribunal dismissed the appeal based on the findings that the processes did not amount to manufacture and that there was a suppression of facts by the appellant.