2018 (2) TMI 1241 - AT - Central Excise

CENVAT credit of CVD - re-import of goods for repair - manufacture or not? - Held that - the goods have been re-imported upon return of the same by the foreign buyer - Though the list of processes is elaborate, it cannot be said that the processes have changed the goods substantially and anything new has come into existence. The re-packing of the same will not alter the nature of the goods - the re-imported goods have been subjected to only various processes of repair and refurbishment and same cannot be considered as processes of manufacture as per Section 2 (f) of the Central Excise Act, 1944. The appellant is not required to pay the excise duty when such re-processed goods are cleared but are required to reverse the Cenvat credit availed at the time of re-entry of the goods back into the factory. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the appellant is required to pay excise duty on re-processed goods cleared to the Railways?
2. Whether the processes carried out on the re-imported goods amount to manufacture?
3. Whether the appellant is required to reverse the Cenvat credit availed at the time of re-entry of the goods into the factory?

Analysis:

Issue 1:
The appellant contended that the processes carried out on the re-imported goods constituted manufacture, and thus, they were only required to pay the excise duty on the newly manufactured goods. However, the Revenue argued that the processes were repair and refurbishment, not manufacturing activities. The Tribunal found that the processes did not substantially change the goods, and the re-imported goods were subjected to repair and refurbishment, not manufacture. Therefore, the Tribunal held that the appellant was not required to pay excise duty on the re-processed goods cleared to the Railways.

Issue 2:
The appellant claimed that the activities carried out on the re-imported goods amounted to manufacture, as they significantly altered the goods. The Revenue contended that the processes were merely repair and refurbishment, not manufacturing activities. The Tribunal examined the list of processes carried out by the appellant and determined that the activities did not change the goods substantially to create something new. Consequently, the Tribunal concluded that the processes undertaken were repair and refurbishment, not manufacture, in accordance with Section 2 (f) of the Central Excise Act, 1944.

Issue 3:
Regarding the Cenvat credit availed at the time of re-entry of the goods into the factory, the appellant argued that they should not be required to reverse the credit as they had already paid the excise duty on the re-imported goods. However, the Revenue insisted that the appellant should reverse the Cenvat credit. The Tribunal referred to Rule 16 of the Central Excise Rules, 2002, which mandates the reversal of Cenvat credit in such cases. Consequently, the Tribunal held that the appellant was required to reverse the Cenvat credit availed at the time of re-entry of the goods into the factory.

In conclusion, the Tribunal upheld the impugned order, dismissing the appeal as they found no infirmity in the decision.