2020 (3) TMI 657 - CGOVT - Central Excise

Rebate claim - export of goods - trading activity - rejection on the ground that there was no manufacturing activity undertaken and therefore no duty was leviable on it - HELD THAT - A JCB machine (model no. JCB 4DX, colour- yellow having engine model no. JCB 444 of capacity 68.6 kw, 92 HP) has been supplied as per the export order by the applicant under the brand name of JCB. The claim of the applicant that he has fitted the cold start kit in the engine is incorrect since the export order mentions the engine and cold start kit separately and the packing list also mentions them separately - It is further observed that JCB machine has been supplied with standard accessories which are in the nature of bought out items. Since these were duty paid, the applicant has availed Cenvat credit of the same and exported them together as a single item. Since the activity undertaken is in the nature of trading activity, no rebate is admissible in respect of the impugned goods. The claim of the applicant for allowing Cenvat credit debited at the time of export merits no consideration. The Government does not find any deficiency in the Commissioner (Appeals) s order - Revision rejected.

Issues involved:
1. Rejection of rebate claim by the Adjudicating Authority.
2. Determination of whether any manufacturing activity took place.
3. Entitlement of the applicant to rebate against exports.

Issue 1: Rejection of rebate claim by the Adjudicating Authority
The case involved a Revision Application filed against the Order-in-Appeal rejecting the appeal against the Order-in-Original. The applicant had cleared export goods on payment of duty but was denied rebate by the Adjudicating Authority due to the absence of manufacturing activity. The Appellate Authority upheld this decision, leading to the Revision Application. The applicant argued for entitlement to rebate in cash or re-credit of the debited amount in their Cenvat credit account.

Issue 2: Determination of whether any manufacturing activity took place
During the hearing, it was revealed that the applicant had purchased a JCB machine, customized the engine and tire mechanism for specific weather conditions in Siberia as per a contract from Russia. The key question was whether customization of the goods constituted manufacturing activity. The applicant cited legal cases related to manufacturing activity, but the government found that the customization did not amount to manufacturing as defined by the Central Excise Act, as no significant modifications were made by the applicant.

Issue 3: Entitlement of the applicant to rebate against exports
The government analyzed the export order and found that the goods supplied were standard items with minor modifications. The applicant's claims of customizing the engine and tires were refuted based on discrepancies in the export order and packing list. It was noted that the applicant was not registered with Central Excise authorities for such activities, and the customization claimed was not substantiated. As the supplied goods were essentially standard with bought-out accessories, the government concluded that the activity was more of a trading nature, making the applicant ineligible for rebate. The claim for re-credit of Cenvat credit debited during export was also dismissed.

In conclusion, the government found no deficiency in the Commissioner (Appeals)'s order and rejected the revision application, upholding the decision to deny the rebate claim to the applicant based on the lack of substantial manufacturing activity and the nature of the supplied goods.

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