2016 (2) TMI 149 - AT - Central Excise

Reversal of CENVAT credit - clearance of inputs as such or clearance of manufactured product - product received from the job worker - demand of the duty liability with interest was confirmed and penalties were imposed - whether the appellant is required to reverse the Cenvat Credit availed as sought by the revenue authorities or otherwise, on the clearances of the said product? - Held that - The said product is undergoing the process of removal of moisture is not in dispute. In our considered view, removal of moisture is also a process, as a customer purchases said product from the appellant needs to have specification of non-existence of moisture in the final products for his consumption. Removal of moisture is a process which may be done by traditional method of exposure to heat by spreading the said products in the sun light or in dryers. Be that as it may, removal of moisture is a process that would render the product marketable to their customers cannot be disputed. It is also further to be noted removal of moisture from said product, appellant has to empty from the containers which was received from the job workers, and after removal of moisture, quality test repack them in new containers and label the said product as their own products, which activity falls within ambit of chapter note no. 10 of the chapter 29 and we have to hold that the said product is manufactured by the appellant, it can be seen that the CENVAT credit was correctly availed by the appellant, the duty liability is discharged on the transaction value is correct. To our mind the case of revenue treating the said product as removal of inputs as such, is misconceived. - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant is required to reverse the Cenvat Credit availed on the clearances of the said product?

Analysis:
The appeal was against an Order-in-Appeal where the appellant, a manufacturer of excisable goods, sent raw materials to a job worker for manufacturing a product. The department claimed that the product cleared by the appellant was clearance of input, requiring them to reverse the CENVAT credit. The appellant argued that the product was not input and was cleared after enhancement of product value. They contended that the treatment undertaken on the product amounted to manufacture, citing relevant case laws. The department argued that the appellant did not undertake processes falling under the relevant chapter note. The Tribunal considered these arguments and the factual matrix.

The key issue was whether the appellant had to reverse the CENVAT credit availed on the clearances of the said product. It was undisputed that the appellant received the product from the job worker, underwent processes like moisture removal, quality control, packing, and labeling, and then cleared the product to purchasers. The Tribunal analyzed the provisions of the Central Excise Act defining "manufacture" and noted that the removal of moisture was a process that rendered the product marketable.

The Tribunal held that the removal of moisture and other processes undertaken by the appellant fell within the ambit of relevant chapter notes, making the product manufactured by the appellant. They found that the CENVAT credit was correctly availed, and the duty liability discharged on the transaction value was appropriate. The Tribunal distinguished a relied-upon case where the facts were different, emphasizing that in this case, the processes undertaken by the appellant amounted to manufacture. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the appellant was not required to reverse the CENVAT credit availed on the clearances of the said product. The decision was based on the processes undertaken by the appellant, which were deemed to amount to manufacture, as per relevant legal provisions and case laws cited during the proceedings.