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2024 (4) TMI 30 - AT - Central ExciseProcess amounting to manufacture - manufacture and clearance of excisable goods such as modems converters ethernet switch ISDN terminals multiplexes etc. in their own brand name falling under Chapter heading 851762 of the Central Excise Tariff Act 1985 - duty paid after availing cenvat credit of the CVD paid on imported modems from the manufacturing unit at 29B/1 is permissible or not - CENVAT Credit on inputs used in manufacturing of finished goods under CENVAT Credit Rules 2004 - violation of Rule 8(3A) of the Central Excise Rules 2002 - levy of penalty. Whether the activities carried out by the appellant on the imported Modem at their Registered trading premises at 29B/3 resulted into manufacture as per Section 2(f)(iii) of Central Excise Act 1944? - HELD THAT - A plain reading of the extended meaning of manufacture it is clear that for the goods specified in Third Schedule the activities of packing or repacking of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of the retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer have been considered as amounting to manufacture even if the said activities do not fall under main part of Section 2(f). Modems are specified at Sl.No.81A of the Third Schedule to the Central Excise Act 1944. A careful analysis of the activities undertaken by the appellant from the dealers premises it reveals that the imported modems were not simply cleared as such but it has been opened tested (for whatsoever reason); the purpose is not only visual inspection as a formality but tested by qualified engineers which necessarily includes if damaged or any manufacturing deficiency to repair/remove the same to put in saleable condition; the tested modems then repacked in the boxes and placed in bigger cartons along with other modems accessories which would make the modems marketable procured and supplied along with the modems after affixing the logo and labelling the modems with appellant s name and address. These activities definitely relevant and necessary for marketing the product to the end consumer. In similar circumstances for the product switch gears this Tribunal in the case of HPL Electronic Power Ltd. 2018 (2) TMI 223 - SC ORDER held that the activities of packing and repacking labelling and relabelling of switch gear amounts to manufacture within the definition of Section 2(f)(iii) of the Central Excise Act 1944 - the activities carried by the appellant in the premises at 29B/3 on imported modems would result into manufacture within the meaning of Section 2(f)(iii) of Central Excise Act 1944. Consequently the appellant are required to discharge duty on the imported modems for the aforesaid activities in their trading premises which amounts to manufacture. Whether the duty paid after availing cenvat credit of the CVD paid on imported modems from the manufacturing unit at 29B/1 is permissible? - HELD THAT - When the Department examined the processes/activities carried out by the appellant opined that the activities would result into deemed manufacture ; hence duty is payable therefore in all fairness the dealer s Registration for the said premises belonging to the appellant ceases and the trading premises became manufacturing premises as there is no other items other than modems which was traded from the said premises - there are no irregularity in availing the cenvat credit even though the input-modems had already sold/cleared by the appellant. Further when there is no dispute that the imported modems earlier received and cleared from trading premises; the credit subsequently availed only for the purpose of discharging duty leviable on the modems when the activities found to be manufacture under Section 2(f)(iii) of Central Excise Act 1944. However the excess credit that remained in balance after debiting the credit equal to the duty payable on the imported modems and utilised for the clearance of their own manufactured modems at the manufacturing premises is definitely inadmissible as the said excess credit attributable to imported modems had already been passed on by the Appellant to their customers while selling the imported modems by issuing dealer s invoice. Now availing the same credit again and utilising it for clearance of indigenous modems and other goods manufactured in the manufacturing premises would result in availing and utilising cenvat credit twice on the same amount of CVD and other duties relating to imported modems that is once mentioning in the dealer s invoice and second time in the manufacturer s invoice while clearing the manufactured goods from the manufacturing premises. The said excess credit has been subsequently paid by the appellant by debiting their PLA account with interest and the ld. Commissioner has rightly appropriated the same in the order. Whether the Appellant contravened Rule 8(3A) of the Central Excise Rules 2002 in discharging the duty by utilising the credit from their manufacturing unit situated at 29B/1? - HELD THAT - As contended by the Ld. Advocate for the Appellant since Rule 8(3A) of the Central Excise Rules 2002 has been held to be ultra vires of the rule making power by the Hon ble Gujrat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT therefore the findings of the learned Commissioner on this count also cannot be sustained. Levy of penalty - HELD THAT - The issue involved in the present case is interpretation of law and consequent actions of debiting the duty from cenvat credit account maintained in the manufacturing premises was after due intimation to the Department therefore imposition of penalty on the appellants is unwarranted and accordingly set aside. Appeal disposed off.
Issues Involved:
1. Whether the activities carried out by the appellant on the imported Modem at their Registered trading premises resulted into 'manufacture' as per Section 2(f)(iii) of Central Excise Act, 1944. 2. Whether duty paid after availing CENVAT credit of the CVD paid on imported modems from the manufacturing unit is permissible. 3. Whether the Appellant contravened Rule 8(3A) of the Central Excise Rules, 2002 in discharging the duty by utilizing the credit from their manufacturing unit. Summary: Issue 1: Manufacture of Imported Modems The Tribunal examined whether the activities at the appellant's trading premises constituted 'manufacture' u/s 2(f)(iii) of the Central Excise Act, 1944. The appellant argued that their activities, such as testing and labeling, did not amount to 'manufacture' as the modems were already marketable. The Revenue contended that these activities made the modems marketable to the consumer, thus falling under 'manufacture'. The Tribunal agreed with the Revenue, citing that the activities performed, including affixing labels and packing with accessories, rendered the modems marketable to the end consumer. Consequently, the activities were deemed 'manufacture' within the meaning of Section 2(f)(iii). Issue 2: Duty Payment via CENVAT Credit The Tribunal addressed whether the appellant could discharge duty liability on imported modems by debiting the CENVAT credit account from their manufacturing unit. The appellant had availed credit and paid duty after due intimation to the Department. The Tribunal found that merging the dealer's registration with the manufacturing unit's registration was a procedural issue. Since the activities were deemed 'manufacture', the appellant was entitled to avail CENVAT credit for the duty paid on imported modems. However, any excess credit utilized for clearing manufactured goods was inadmissible, as it would result in double utilization of the same credit. The Tribunal upheld the Commissioner's decision to appropriate the excess credit. Issue 3: Violation of Rule 8(3A) The Tribunal considered the applicability of Rule 8(3A) of the Central Excise Rules, 2002, which was held ultra vires by the Gujarat High Court in Indsur Global Ltd. The Tribunal concluded that since the rule was deemed ultra vires, the findings of the Commissioner on this count could not be sustained. Penalty The Tribunal noted that the issue involved interpretation of law and the appellant had acted with due intimation to the Department. Therefore, the imposition of penalty was deemed unwarranted and was set aside. Conclusion The impugned orders were modified as per the Tribunal's findings, and the appeals were disposed of accordingly.
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