2020 (1) TMI 481 - AT - Central Excise

Rebate claim - export of final products from the factory - process amounting to manufacture or not - Manufacture on job work basis - assembly - they procured input materials which comprised of parts/equipments and utilised the same for manufacturing of Briqueting Hydraulic Press (Bailing Press) and Cut to Length Line and Continuous Automatic Coil to Coil Colour Coating Line, with Operational Spares.- CENVAT Credit - HELD THAT - It is an undisputed fact that the appellant procured duty paid machineries, parts and accessories of Continuous Automatic Coil to Coil Colour Coating Line and Briqueting Hydraulic Press and carried out the processing jobs thereon as set out in the impugned order, which included assembly to produce the aforesaid final products which were exported upon payment of duty under claim of rebate. It is also seen from the records that the input machines, parts and accessories were goods classifiable as excisable goods by themselves under tariff items different from the tariff items under which the exported final products were classified - the activities undertaken by the appellant amounted to manufacture of excisable goods within the meaning of Section 2(f) of the Central Excise Act, 1944. CENVAT credit - HELD THAT - The appellant is eligible to avail Cenvat credit of the duty paid on the said input machineries, parts, etc. under the Cenvat Credit Rules and there is no infirmity on the part of the appellant in availment of Cenvat credit in the instant case. The disallowance of Cenvat credit of ₹ 1,76,17,647/- and the duty demand of ₹ 61,94,772/- confirmed by the impugned order against the appellant are therefore unsustainable. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Disallowance of Cenvat credit availed by the appellant.
2. Confirmation of duty demand and imposition of penalty.
3. Determination of whether the activities undertaken amounted to 'manufacture' under Section 2(f) of the Central Excise Act, 1944.
4. Applicability of extended period of limitation under Section 11A(1) of the Act.
5. Relevance of the condition of goods (old and used) in determining eligibility for Cenvat credit.

Issue-wise Detailed Analysis:

1. Disallowance of Cenvat Credit:
The Commissioner of Central Excise disallowed Cenvat credit of ?1,76,17,647/- availed by the appellant during July 2004 to December 2005, and confirmed a duty demand of ?61,94,772/- as credit wrongly utilized towards payment of duty while exporting final products. The appellant argued that they procured input materials from suppliers and utilized them for manufacturing various machines, which were then exported upon payment of duty and claiming rebate. The Commissioner, however, held that the operations undertaken did not result in the emergence of a new product and thus did not qualify as 'manufacture' under Section 2(f) of the Central Excise Act, 1944. Consequently, the appellant was not entitled to avail Cenvat credit.

2. Confirmation of Duty Demand and Imposition of Penalty:
The Commissioner confirmed a duty demand of ?61,94,772/- and imposed an equivalent penalty on the appellant. The appellant contended that the processes undertaken, including assembly and other mechanical operations, constituted manufacturing within the meaning of Section 2(f) of the Act. They relied on several judicial decisions to support their claim that the final products exported were manufactured goods, and thus, Cenvat credit was rightly availed. The appellant also argued that the show cause notice and demand for the period July 2004 to December 2004 were barred by limitation as there was no suppression of facts or willful misstatement.

3. Determination of 'Manufacture':
The Tribunal examined whether the activities undertaken by the appellant amounted to 'manufacture' of excisable goods. Citing the Supreme Court's decisions in cases like Narne Tulaman Manufacturers Pvt. Ltd. and Poonam Spark (P) Ltd., the Tribunal held that the assembly of various components to produce new and different commercial products constituted 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944. The Tribunal concluded that the appellant's activities resulted in the creation of new products and thus qualified as manufacturing.

4. Applicability of Extended Period of Limitation:
The appellant argued that the extended period of limitation under Section 11A(1) of the Act was inapplicable as there was no suppression of facts or willful misstatement. They had submitted all relevant documents and returns to the jurisdictional Central Excise authorities, who had verified and allowed the export of goods. The Tribunal noted that the extended period of limitation could not be invoked in the absence of suppression or willful misstatement, and the reasons provided by the Commissioner were insufficient to justify the extended period.

5. Relevance of Condition of Goods:
The Commissioner had observed that the condition of the goods (old and used) was not relevant for deciding the issue. The Tribunal upheld this finding, noting that no appeal had been preferred by the Revenue against this observation, and thus, it could not be agitated afresh in the present appeal.

Conclusion:
The Tribunal set aside the impugned order, allowing the appellant's appeal with consequential relief. It held that the appellant's activities amounted to 'manufacture' of excisable goods, making them eligible for Cenvat credit. The disallowance of Cenvat credit and the duty demand confirmed by the Commissioner were deemed unsustainable. The Tribunal also ruled that the extended period of limitation was not applicable in this case.

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