2013 (8) TMI 844 - AT - Central Excise

Activity Manufacture or Not - Assesse was importing Chassis from their Principals in Japan - The Assesse was taking the credit of CVD and SAD - A Show Cause Notice was issued to the assesse for denial of the Cenvat Credit availed and utilized by them during the period - revenue contended that there was no factory at the premises and it was only a parking slot/warehouse/godown - Whether the activity was being carried out by the assesse will amount to manufacture - Held that - Activities undertaken by the assesse will not amount to manufacture - assesse cannot be considered as a manufacturer and therefore not eligible to take the Cenvat Credit under Rule 3 of Cenvat Credit Rules 2004 - The activities undertaken by the assesse alone will not constitute manufacturing the vehicle, the final product - These activities were very minor in nature and would not entitle the assesses to be considered as manufacturer of motor vehicle - These activities may be needed to satisfy the requirements of Central Motor Vehicles Act or some other law but that will not amount to manufacture for excise purpose. Activities carried out by them was inspection of the same and fixing of some parts, if required and thereafter sending it to the job worker who undertakes the body building activities - The goods received form job workers were vehicles - Again inspection was carried out by the assesse and certain parts like kits etc. were fixed in order to comply with the Central Motor Vehicles Acts and Rules thereof. CENVAT credit - Interest and Penalty Whether Cenvat Credit can be demanded when they have utilized the same for payment of duty on final products Held that -There was no dispute that the duty on the final product had been paid by the assesses by utilizing the Cenvat Credit being demanded and department had not disputed payment of duty on vehicles - ASHOK ENTERPRISES Versus COMMISSIONER OF CENTRAL EXCISE, CHENNAI 2007 (11) TMI 67 - CESTAT, CHENNAI - The Cenvat Credit availed cannot be demanded in spite of the fact that the activity undertaken by the appellant does not amount to manufacture appeal allowed.

Summary

Issues Involved:
1. Whether the activities carried out by the appellant amount to "manufacture" under Section 2(f) of the Central Excise Act.
2. Whether the appellant is entitled to avail CENVAT Credit.
3. Whether the CENVAT Credit can be demanded back when utilized for payment of duty on final products.

Issue-wise Detailed Analysis:

1. Whether the activities carried out by the appellant amount to "manufacture" under Section 2(f) of the Central Excise Act:

The appellant imported chassis and performed various activities such as inspection, replacement/repair of faulty parts, and fitting additional parts to comply with the Central Motor Vehicle Act, 1989. The chassis were then sent to job workers for body building and received back as fully manufactured vehicles. The main ground for denial of credit was that the appellant's premises did not qualify as a factory and the activities performed did not result in the emergence of a new commercial commodity. The adjudicating authority held that the activities carried out by the appellant did not amount to manufacture as defined under Section 2(f) of the Central Excise Act, which includes any process incidental or ancillary to the completion of a manufactured product.

2. Whether the appellant is entitled to avail CENVAT Credit:

The appellant argued that their activities amounted to manufacture and cited various case laws to support their contention. They emphasized that the processes they undertook were essential for the vehicles to be marketable and compliant with the Central Motor Vehicle Act. However, the adjudicating authority and the Commissioner (AR) contended that the appellant's premises were merely a warehouse without any manufacturing facilities. The activities performed were minor and could be done by any vehicle mechanic, thus not qualifying as manufacturing activities. Consequently, the appellant was not considered a manufacturer and was not entitled to avail CENVAT Credit.

3. Whether the CENVAT Credit can be demanded back when utilized for payment of duty on final products:

Despite the activities not amounting to manufacture, the appellant had paid duty on the final products using the CENVAT Credit. The Tribunal referred to the judgment of the Bombay High Court in the case of Commissioner of Central Excise, Pune III Vs. Ajinkya Enterprises, which held that 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. A similar view was taken by the Gujarat High Court in the case of Commissioner of Central Excise & Customs, Surat-III Vs. Creative Enterprises. Therefore, the Tribunal concluded that the CENVAT Credit availed by the appellant could not be demanded back.

Conclusion:

The Tribunal held that the activities undertaken by the appellant did not amount to manufacture. However, since the duty on the final products had been paid and accepted by the department, the CENVAT Credit availed by the appellant could not be demanded back. The appeal was allowed in favor of the appellant.