2012 (11) TMI 236 - AT - Central Excise

Cenvat credit - defective CPTs - earlier been cleared on payment of duty, had been received back in the factory for being re-made in the terms of the provisions of Rule 16 of the Central Excise Rules - department was of the view that since in the re-making of the CPTs some Cenvat credit availed parts/inputs are used and since re-making does not amount to manufacture, they would not be entitled to Cenvat credit in respect of the fresh parts used for re-making of the CPTs - Held that - Fresh CPTs made had been cleared on payment of duty - appellant had disclosed the process undertaken by them as early as in the month of May, 2001 in respect of the defective CPTs received from their customers and hence, the department cannot allege suppression of facts saying that the appellant had not disclosed that they were taking Cenvat credit on the inputs used in re-making of the goods - pre-deposit waived - stay application is allowed.

Summary

Issues:
1. Availment of Cenvat credit on inputs used in re-manufacturing of defective Colour Picture Tubes (CPTs).
2. Dispute regarding whether the re-making process amounts to manufacture.
3. Validity of demand for recovery of allegedly wrongly taken Cenvat credit.
4. Imposition of penalty under Section 15(2) of the Central Excise Act.

Issue 1: Availment of Cenvat credit on inputs used in re-manufacturing of defective Colour Picture Tubes (CPTs):
The appellant availed Cenvat credit on duty paid inputs used in the manufacture of picture tubes, including defective CPTs received back under Rule 16. The department contended that using Cenvat credit availed parts in re-making CPTs does not entitle the appellant to credit for fresh parts used. A show cause notice was issued seeking recovery of wrongly taken Cenvat credit. The Asstt. Commissioner confirmed the demand, invoking the extended period under proviso to Section 11A(1) of the Central Excise Act.

Issue 2: Dispute regarding whether the re-making process amounts to manufacture:
The appellant argued that re-making defective CPTs using salvaged and fresh parts constitutes manufacturing, citing Tribunal judgments. The department opposed, relying on other Tribunal decisions stating such processes do not amount to manufacture. The Tribunal noted that under Rule 16, if the process amounts to manufacture, duty is payable on the goods at the applicable rate. The Tribunal found merit in the appellant's argument, citing precedents and the appellant's early disclosure of the re-making process.

Issue 3: Validity of demand for recovery of allegedly wrongly taken Cenvat credit:
The appellant contended that the Cenvat credit demand was time-barred and that the process of re-making CPTs qualified as manufacturing. The Tribunal agreed, emphasizing that the appellant had disclosed the re-making process early on, negating any allegation of suppression of facts. The Tribunal waived the requirement of pre-deposit for the appeal and stayed the recovery during the appeal's pendency.

Issue 4: Imposition of penalty under Section 15(2) of the Central Excise Act:
The Asstt. Commissioner imposed a penalty under Rule 15(2) read with Section 11AC of the Central Excise Act. However, the Tribunal did not specifically address this issue in the judgment provided.

In conclusion, the Tribunal allowed the appeal, waived the pre-deposit requirement, and stayed the recovery of wrongly taken Cenvat credit during the appeal process. The Tribunal found that the re-making process of defective CPTs by the appellant constituted manufacturing, supported by relevant precedents and the appellant's timely disclosure of the process.