2018 (1) TMI 967 - AT - Central Excise

CENVAT credit on inputs used to manufacture goods which are cleared on payment of duty - Manufacture taking place or not? - Held that - without adverting to the fact as to whether the activities undertaken by the appellant amount to manufacture or not it stands well settled that even if the activity undertaken by an assessee does not amount to manufacture of the final products which stands cleared on payment of duty the benefit of cenvat credit cannot be disallowed - Inasmuch as the final product stands cleared by the appellant on payment of duty we are of the view that the credit cannot be disallowed to the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the activities of packing and repacking of goods amount to manufacture for the purpose of availing cenvat credit of duty paid on inputs.
- Whether the appellant is entitled to cenvat credit of duty paid on inputs for the activities undertaken.
- Whether the penalties imposed on the appellant are justified.

Analysis:

1. The appellants, engaged in the manufacture of automobile parts and components, import some parts from Japan and undertake various activities on them before clearing the final product after availing credit of duty paid on imported goods. The Revenue contended that the activities of packing and repacking do not amount to manufacture, thus denying the cenvat credit. The appellant argued that these activities constitute manufacture as per customer requirements.

2. The Tribunal examined whether the activities undertaken by the appellant qualify as manufacture for availing cenvat credit. The Tribunal cited the case of Asian Colour Coated Ispat Vs. CCE, Delhi-III, where it was established that even if the activity does not amount to manufacture of the final product cleared on payment of duty, the cenvat credit cannot be disallowed. As the final product was cleared on duty payment, the Tribunal held that the credit cannot be denied to the appellant, overturning the impugned orders.

3. The Tribunal emphasized that the mere repacking of already marketable goods does not affect their marketability, as the goods were marketable at the time of purchase. Therefore, the Tribunal found no merit in the Revenue's contention and set aside the impugned orders, allowing both appeals and providing consequential relief to the appellants.

4. The Tribunal's decision highlights the importance of considering whether the activity amounts to manufacture for the purpose of availing cenvat credit, especially when the final product is cleared on payment of duty. In this case, the Tribunal ruled in favor of the appellant, emphasizing that the benefit of cenvat credit cannot be disallowed solely based on the nature of activities undertaken on the imported goods before clearance.