2018 (9) TMI 1575 - AT - Central Excise

Manufacture - activity of inspection and sample testing - Rule 16 of Central Excise Rules 2002 - removal of inputs as such - non-maintenance of separate records - sub-rule 5 of Rule 9 of Cenvat Credit Rules, 2004 - willful misstatement of facts - penalty. Whether inspection, testing and loading of software on the imported IFWT-Telephone Instruments, before the clearance by the assessee, amounts to manufacture? - Held that - In case, the Revenue takes a stand that the activity undertaken by appellant does not amount to manufacture, the assessee succeeds in the earlier appeal as where the process do not amount to manufacture, the duty paid by the appellant needs to be treated as a deposit and requires to be refunded as the appellants have shown that the same is not passed on - Revenue cannot change the goal posts and have two different approaches to the same issue for different periods more so when the facts are identical - In the interest of Justice and equity, the issue requires to go back to the original adjudicating authority - Matter on remand. Whether the credit availed on the Power Supply Units, in respect of which it has been alleged that proper accounts have not been maintained, is factually correct, if not whether Cenvat credit is allowable? - Held that - Prima facie the appellants have made out a case that they have maintained record pertaining to the receipt, storage, usage and clearance of the power supply unit. It is seen that assessee s own records were taken as an evidence for arriving at the demands raised in the show-cause notice - on this issue also the matter required to go back to the original adjudicating authority for a proper appreciation of records maintained by the appellants. Appeal allowed by way of remand.

Summary

Issues:
1. Whether inspection, testing, and loading of software on the imported IFWT-Telephone Instruments amount to manufacture?
2. Whether the denial of Cenvat credit on power supply units is justified?

Analysis:

Issue 1: Inspection, Testing, and Loading of Software
The appellant, a manufacturer of excisable goods, imported WLL CDMA 2000 IX integrated fixed Wireless Terminals and Power Supply Units for supply to BSNL. The Department alleged that the processes undertaken by the appellant did not amount to manufacture, leading to demands and penalties. The appellant argued that the processes, including testing and loading software, were integral to manufacturing, citing relevant case laws. The Tribunal noted that the Department's stance lacked clarity and inconsistency in similar cases. The Tribunal observed that the process of testing was crucial for marketability, as per Supreme Court judgments. It was concluded that the issue required further examination by the adjudicating authority to ensure justice and equity.

Issue 2: Denial of Cenvat Credit on Power Supply Units
Regarding the denial of Cenvat credit on power supply units, the appellant contended that they maintained proper records as required under the Cenvat Credit Rules. The Tribunal found that the appellant's records were used as evidence for raising demands, indicating compliance. Thus, the matter was deemed to necessitate a detailed review by the original adjudicating authority for a fair assessment of the records maintained by the appellant. Consequently, the Tribunal allowed the appeal by remanding the case for further scrutiny.

In conclusion, the Tribunal's judgment highlighted the importance of testing in the manufacturing process for marketability and emphasized the need for consistency and fairness in decision-making. The case underscores the significance of maintaining accurate records to support claims for Cenvat credit and the necessity for a thorough evaluation by the adjudicating authority to ensure a just outcome.