2019 (4) TMI 1141 - AT - Central Excise

CENVAT credit - denial on the ground that the process of manufacture not taking place - it was alleged by Revenue that the machinery was exported without export being taken place - machinery described as Continuous Automatic Coil to Coil galvanizing Line under Chapter 8419 - HELD THAT - This being complex machinery, the appellant procured various components and sub-systems from different vendors. Upon receipt of such goods in the factory, they availed cenvat credit. It is not in dispute that all the various components/sub-systems were received in the appellant s factory and subject to various processes. It is not in dispute that the appellant has procured the various inputs components and sub-systems which made up the complex machinery. It is also not in dispute that these goods have been received in the appellant s factory. Further, there is no dispute that any of the goods so procured are not required in the assembly of the machines cleared for export - there is no reason to take the view that the cenvat credits taken are improper. It is settled position of law that subsequent reversal of Modvat credit is to be considered as non-taking of the credit - It is not in doubt that at the time of clearance of the machinery for export, duty stand paid. Since the duty is paid at the time of clearance of the final product, the credit availed on the inputs stand reversed already - thus, such credits are to be considered as non-taken abinitio. There is no justification for ordering payment of cenvat credit all over again - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over export of machinery
- Availment of cenvat credit on exported machinery
- Allegations of no manufacturing activity in the appellant's factory
- Reversal of cenvat credit and imposition of penalties

Analysis:

1. The dispute revolves around the export of a complex machinery known as 'Continuous Automatic Coil to Coil galvanizing Line' under Chapter 8419. The appellant, registered for manufacturing machineries under Chapter 84, exported these machines in multiple consignments. The department alleged that the appellant did not undertake any manufacturing activity on the exported machinery, leading to a demand for reversal of cenvat credit availed.

2. The appellant argued that they did carry out manufacturing activities as per Section 2(f) of the Central Excise Act, supported by evidence of activities like testing and assembly. They contended that the machinery was assembled in their factory before export, justifying the availment of cenvat credit.

3. The Department's representative countered, stating that the machinery components were exported in CKD form and only assembled at the buyer's site, indicating no manufacturing in the appellant's factory. They cited precedents like the Ford India Pvt. Ltd. case to support their stance.

4. The Tribunal noted that the complex machinery was indeed assembled at the buyer's site due to its nature, and the appellant had procured and processed various components in their factory. The adjudicating authority's denial of cenvat credit based on the lack of manufacturing in the factory was challenged.

5. The Tribunal referred to legal precedents, including the Allahabad High Court decision, to establish that subsequent reversal of cenvat credit should be considered as non-availment of credit. Since duty was paid at the time of export, the credit availed on inputs was deemed reversed, and ordering repayment was unwarranted.

6. Consequently, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant, emphasizing that the cenvat credit availed should be considered as non-taken ab initio, given the duty payment at the export stage.

This detailed analysis covers the issues involved in the legal judgment, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in favor of the appellant.