2023 (8) TMI 600 - AT - Central Excise

CENVAT Credit - imported/locally procured inputs when subjected to the processes by the appellant, disputed not to be a process of manufacture by the Revenue - HELD THAT - In the present case, the appellants are engaged in the manufacture of various high precision tools, and also import certain parts used as inputs from their group companies located in Germany, Sweden and Italy. The tools were customised and sold by the appellant on payment of appropriate duty of excise on its transaction value, which was more than the credit availed on the inputs. The Revenue disputed the processes undertaken on the imported items alleging the same do not result into manufacture of a new item different from the inputs; hence the activity undertaken by the appellant purely in the nature of trading; therefore cenvat credit availed on the inputs cannot be admissible. In THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES 2012 (7) TMI 141 - BOMBAY HIGH COURT , the Bombay High Court taking note of the arguments of the Revenue more or less in the same line observed Once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity does not amount to manufacture. There are no merit in the impugned orders - the impugned orders are set aside and the appeals are allowed.

Summary

Issues involved:
The judgment involves the issue of whether the cenvat credit availed on imported/locally procured inputs, which were subjected to processes disputed by the Revenue to not amount to manufacturing, should be recoverable.

Comprehensive details:

Issue 1:
The appellant, engaged in manufacturing high-end precision cutting tools for the metal industry, availed cenvat credit on imported inputs. The Revenue alleged irregular cenvat credit availed on the imported goods, claiming they were not used as inputs in the manufacture of final products. Show-cause notices were issued demanding duty for different periods. The demands were confirmed by the adjudicating authority and penalties were imposed. The appellant appealed before the Commissioner (Appeals) after which the present appeals were filed.

Issue 2:
The appellant contended that they customized goods as per customer requirements, imported raw materials for finished goods, and cleared final products paying duty. They also cleared inputs for replacement, paying appropriate Central Excise duty. The appellant cited previous Tribunal orders and High Court judgments supporting the admissibility of cenvat credit on inputs used in the manufacture of finished goods, even if later processes were found not to amount to manufacture.

Issue 3:
The Revenue reiterated the findings in the impugned orders, disputing the processes undertaken by the appellant as not resulting in the manufacture of a new item. The Revenue argued that the activity was trading, not manufacturing, and therefore, cenvat credit on inputs should not be admissible. The Tribunal noted that similar issues had been settled in previous decisions cited by the appellant, where it was held that once duty on final products had been accepted, cenvat credit need not be reversed even if the activity did not amount to manufacture.

Conclusion:
Considering the settled legal principles from previous judgments, the Tribunal found no merit in the impugned orders. Consequently, the orders were set aside, and the appeals were allowed with any consequential relief as per law.