2006 (3) TMI 7 - AT - Central Excise

Central Excise Cenvat credit - Respondent manufactured the machines which was cleared on hired basis after completion of rental period duty paid machine was return back in the factory and dismantle and there components used in manufacture of other machines

Summary

Issues:
Interpretation of Rule 16 of the CENVAT Credit Rules, 2002 regarding credit on goods brought back to the factory for reuse or remanufacturing.

Analysis:
The case involved the respondents who had manufactured machines cleared on a rental basis, later received back and dismantled for using their components in the manufacture of other machines. The lower authority denied Modvat credit, stating that the goods were not brought back for being remade, refined, or reconditioned as required by Rule 16. However, the Commissioner (Appeals) overturned this decision, citing a Tribunal ruling in a similar case. The learned SDR argued that Rule 16 allows credit only for goods brought back for specific purposes like remaking, refining, or reconditioning. The SDR contended that in this case, the goods were dismantled, and their components were used for manufacturing other goods, not meeting the criteria for credit under Rule 16. The SDR emphasized the principle of ejusdem generis, suggesting that "for any other reason" should be interpreted in line with the preceding words in the rule.

Upon reviewing the case, the Tribunal found that the facts aligned with the precedent cited by the Commissioner (Appeals), where goods were used as components for manufacturing different quality goods without being remade or refined. The Tribunal noted that in the present case, the components were indeed used for producing a different quality of goods, similar to the situation in the referenced case. Consequently, the Tribunal concluded that the credit could not be denied based on the specific usage of the components for manufacturing other goods.

Ultimately, the Tribunal dismissed the appeal, upholding the decision that the credit on the goods in question could not be denied based on the utilization of their components for the manufacture of different quality goods.