2018 (12) TMI 724 - AT - Central Excise

CENVAT Credit - inputs - fireworks purchased from their other units - Rule 16(1) of Central Excise Rules 2002 - Held that - The definition of input show that not only the inputs that is used for manufacture of final products but also those goods cleared whose value is included in such final product will come within the definition of inputs. Further all goods used in the factory by the manufacturer of the final product would come within the definition. This means any goods used by manufacturer within the factory is input. The words used are by the manufacturer and not for the manufacture . The authorities below have erred in interpreting that in order to qualify as inputs the goods have to be used for manufacture. Rule 16 speaks about situation wherein duty paid goods are brought into factory for refine reconditioned or for any other reason - In the present case the goods are not brought to the factory but they have been bought by the manufacturer and the value of such goods have been included in the assessable value of the final product. The situation does not give raise to invoke Rule 16(1) at all. The demand cannot sustain and requires to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of CENVAT credit on fireworks purchased from sister units
- Interpretation of Rule 16 of Central Excise Rules 2002

Eligibility of CENVAT Credit on Fireworks Purchased from Sister Units:
The case involved a dispute regarding the eligibility of CENVAT credit on fireworks purchased from sister units. The appellant, engaged in the manufacture of fireworks, combined various types of fireworks purchased from sister units into gift packs and cleared them as a single item by paying excise duty. The department contended that the process of packing the gift boxes amounted to manufacture, thereby denying the credit. The appellant argued that since the value of purchased fireworks was included in the assessable value of the final product, they were eligible for the credit. The definition of inputs was crucial, stating that goods used in the factory by the manufacturer of the final product, or goods cleared along with the final product, qualified as inputs. The Tribunal referred to precedents emphasizing that goods need not be used directly in manufacturing but even indirectly related to the final product to be eligible for credit.

Interpretation of Rule 16 of Central Excise Rules 2002:
The department invoked Rule 16 to deny credit, which pertains to goods brought to the factory for re-making, refining, or other reasons. However, the Tribunal found that this rule did not apply to the current scenario where the goods were purchased by the manufacturer and their value was included in the final product's assessable value. The Tribunal concluded that the demand for credit denial could not be sustained and set it aside, allowing the appeal with any consequential relief. The judgment highlighted the distinction between goods brought into the factory for processing and goods purchased for inclusion in the final product's value.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that the purchased fireworks, included in the gift boxes' value, qualified as inputs eligible for CENVAT credit. The judgment clarified the interpretation of Rule 16 and upheld the appellant's right to claim the credit, setting aside the demand for credit recovery made by the department.