2024 (8) TMI 994 - AT - Central Excise

CENVAT Credit - removal of inputs or capital goods as such - Activity amounting to manufacture or not - whether the Department was justified in not accepting the claim of Manufacturing activity of the Appellant/importer insofar as the dump truck in question is concerned? - HELD THAT - It is not in dispute that the imported goods falling under chapter 87 that was received in incomplete/unfinished condition, but having the essential character of the complete finished goods. The conversion/assembling of the imported dump truck in SKD condition into fully finished dump truck, could amount to manufacture. Further, there is also an observation by the commissioner insofar as the price difference is concerned, but however, the same alone may not be a reason for disregarding the very activity of manufacture since any such difference may invite a different action if the same amounts to infraction of any provision/s of the statute. But, in any case, the factum of assembly is required to be established, which is the primary condition. A cumulative reading of OIO and OIA indicates that the Revenue department had seriously disputed the claims of the Appellant including the import in SKD condition since, apparently, the same was understood to be a complete/finished product/article which was ready to be used. Hence, requiring the production of documentary evidences by the Show Cause Notice issuing authority is justified since, his satisfaction is paramount. Rule 2(a) of the General Rules of Interpretation could be applied when the facts are clear and so would Note 6 ibid. Facts are required to be placed on record before applying the Rules, when the importer has claimed that the article was in SKD condition, the invoice does not say so. But in any case, it was its duty to show with evidence, especially when asked, as to the processes undertaken by it to make the article a finished one. The orders relied upon by the appellant are thus distinguishable, clearly, on facts. It therefore, appears prima facie, that the appellant has not been able to demonstrate (1) the condition of the imported article; and (2) the processes to which the imported article was subjected to. There are no reasons to interfere with the findings of the First Appellate Authority and accordingly, the appeal is dismissed.

Summary

Issues:
1. Whether the Department was justified in not accepting the claim of 'Manufacturing' activity of the Appellant in relation to the dump truck?
2. Whether the activity of assembling the imported dump truck in SKD condition into a fully finished dump truck amounts to 'manufacture'?
3. Whether the importer provided sufficient evidence to support their claim of manufacturing activity?
4. Whether the findings of the lower authorities and the consequent demand can be sustained?

Analysis:

Issue 1:
The case revolves around the Department's refusal to acknowledge the Appellant's manufacturing activity concerning a dump truck. The dispute arose when the Department observed discrepancies in the import and transaction prices of the dump truck, leading to a demand for differential credit under CENVAT Credit Rules, 2004. The lower authorities upheld the demand, prompting the Appellant to file an appeal challenging the decision.

Issue 2:
The crux of the matter is whether the assembly of the dump truck in SKD condition into a fully finished state constitutes 'manufacture.' The First Appellate Authority, relying on a tribunal order, concluded that the activity did not amount to 'manufacture' as claimed by the Appellant. The Appellant argued that the conversion of the dump truck into a finished product falls within the scope of 'manufacture' as per relevant legal provisions.

Issue 3:
The importer's failure to provide concrete evidence supporting their claim of manufacturing activity played a pivotal role in the judgment. Despite asserting that the dump truck was assembled into a finished product, the Appellant did not furnish substantial proof to substantiate their stance. The absence of documentation regarding the assembly process weakened the Appellant's position.

Issue 4:
The Tribunal's decision hinged on the lack of evidence presented by the importer to demonstrate the transformation of the dump truck from SKD condition to a fully finished state. The Tribunal emphasized the importance of factual clarity and evidence in determining the applicability of manufacturing rules. Ultimately, the Tribunal upheld the findings of the First Appellate Authority, dismissing the appeal due to the Appellant's failure to establish the manufacturing process adequately.

In conclusion, the judgment underscores the significance of providing concrete evidence to support claims of manufacturing activities, especially in cases involving imported goods. The decision highlights the necessity of complying with legal provisions and furnishing documentation to substantiate assertions in disputes related to manufacturing processes.