2016 (5) TMI 1073 - HC - Central Excise

Whether the input procured solely for the purpose of export by the assessee is entitled to CENVAT Credit when the goods were subjected only to testing and packing - Held that - the facts of the case show that before the goods were handed over to KTTM, the assessee had undertaken a series of processes. Steel scrap, pig iron and chemicals are received as inputs by the assessee and castings are manufactured. It is only after such a manufacturing activity is undertaken, the goods are sent to one job worker for machinisation. That job worker sends the machinised goods to KTTM Ltd. Therefore, the question of law raised by the Department proceeds to a wrong presumption that the assessee had done nothing except testing and packing. Therefore, the question of law is thoroughly misconceived as it does not arise out of the facts of the case. The questions of law raised in other appeal also proceed on the premise that whatever has been done before the goods are received from the KTTM Ltd., have to be completely forgotten. This is not a case where the assessee is attempting to claim CENVAT Credit twice over. Whatever credit was claimed by them before they sent it to KTTM Ltd., was actually reversed. Therefore, the credit was still available for the assessee to take. The Tribunal was therefore, right in this regard in holding that testing and packing were part of a series of steps undertaken by the assessee for the manufacture of the goods. - Decided against the revenue

Summary

Issues:
1. Whether CENVAT credit can be allowed for inputs procured solely for export but subjected only to testing and packing?
2. Whether machined goods cleared from job workers' premises constitute fully manufactured goods for claiming CENVAT credit?

Analysis:
1. The case involved appeals regarding the allowance of CENVAT credit for inputs procured solely for export but subjected only to testing and packing. The assessee received inputs, manufactured castings, sent them to job workers for machining, and then exported the goods after testing and packing without paying Central Excise Duty. The Department challenged the CENVAT credit claiming that the assessee only did testing and packing, not manufacturing. However, the Court found that the assessee undertook a series of processes before exporting, including manufacturing, and thus, the contention of the Department was misconceived. The Court held that testing and packing were part of the manufacturing process, allowing the CENVAT credit for the assessee.

2. Another issue in the case was whether machined goods cleared from job workers' premises could be considered fully manufactured goods for claiming CENVAT credit. The Department raised concerns about the manufacturing process, arguing that the goods did not undergo significant changes. However, the Court noted that the job workers' activities, along with the subsequent testing and packing by the assessee, constituted a series of steps towards manufacturing the final goods. The Court rejected the Department's arguments, stating that the credit claimed by the assessee was legitimate and not a duplication. Thus, the Court upheld the Tribunal's decision to allow the CENVAT credit for the machined goods cleared from job workers' premises.

In conclusion, the Court dismissed the appeals filed by the Department, ruling in favor of the assessee and upholding the allowance of CENVAT credit for both the inputs procured solely for export and the machined goods cleared from job workers' premises.