2017 (2) TMI 361 - AT - Central Excise

CENVAT credit - hanger without hook imported from abroad has undergone the process of manufacture fixing the hook thereto, in India - whether the process amounts to manufacture and credit is to be allowed on the above goods? - Held that - Unhooked hanger imported and used for hooking the same was input since only upon hooking, the hanger becomes a complete hanger - the impugned order denying Cenvat credit of the duty paid is liable to be set aside - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the hanger without hook imported from abroad, which undergoes a manufacturing process in India by fixing the hook thereto, qualifies as an input for Cenvat credit under Rule 2(l) of Cenvat Credit Rules, 2004?

Analysis:
The appellant argued that the hanger without hook imported from abroad, upon undergoing the process of fixing the hook in India, constitutes a manufacture and thus qualifies as an input under Rule 2(l) of Cenvat Credit Rules, 2004. The appellant contended that the show cause notice issued under the assumption that the hanger without hook is not an input was based on a misconception of law. The law states that anything undergoing the process of manufacture in a factory is considered an input. The appellant highlighted that there was no finding by the authority that the imported hangers had not undergone the process of fixing the hook, making the show cause notice erroneous.

The Revenue supported the adjudication, but upon hearing both sides and examining the records, the Tribunal found merit in the appellant's argument. The Tribunal noted that the unhooked hanger imported from abroad and used for hooking became a complete hanger only after the hooking process. In light of this factual scenario, the Tribunal concluded that the impugned order denying Cenvat credit of the duty paid on the imported hangers was incorrect. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.

In conclusion, the Tribunal ruled that the hanger without hook imported from abroad, which underwent a manufacturing process in India by fixing the hook thereto, qualified as an input for Cenvat credit under Rule 2(l) of Cenvat Credit Rules, 2004. The Tribunal emphasized that the completion of the hanger only occurred after the hooking process, making it eligible for the Cenvat credit. The judgment highlighted the importance of correctly interpreting the law regarding inputs in the context of manufacturing processes to determine eligibility for tax benefits.