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TMI Blog2007 (3) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out by an agency viz. M/s. TVS Logistics Ltd. (M/s. TVS, for short) appointed by the appellants. From the scrutiny of records maintained by the appellants as also from the results of subsequent investigations, the department found that they had availed Cenvat credit on the components procured from vendors and exported in the above manner from KDP Plant during the period 7-6-2000 to 31-10-2002. It appeared to the department that the entire activity carried out at KDP Plant was merely a trading activity and, therefore, the components received there from vendors and subsequently exported did not qualify to be 'inputs' for the purpose of Cenvat credit. On this basis, three show-cause notices were issued covering the periods 7-6-2000 to 31-3-2001, 1-4-2001 to 31-12-2001 and 1-1-2002 to 31-10-2002 for recovering from the appellants duty amounts equivalent to the Cenvat credits taken on the components procured from vendors and exported from KDP Plant during the respective periods. These notices invoked the relevant rules relating to Cenvat credit, which were in force during the respective periods. They also invoked the relevant provisions for levy of interest on the duty demanded as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be treated as having been used in the manufacture of the final product. The expression "manufacture" has to be liberally construed for the purpose of exports in view of CBEC's circular No. 489/55/99-CX dated 13-10-99. Components received into KDP Plant directly from vendors were also capable of being used in the local manufacture of cars in the factory. Similarly, components brought into the factory for local manufacture of cars were capable of being used in KDP Plant for exports. In other words, the two categories of components were interchangeable. For this reason also, the components directly procured from vendors for export purpose should be considered to have been used in or in relation to manufacture of cars. In this connection, learned counsel referred to certain statements prepared by the appellant, contained in Vol. I of their Paper Book. These included statements of "material transferred from KDP Plant to Main Plant (factory)" during the periods 7-6-2000 to 31-3-2001 and 1-4-2001 to 31-12- 2001 and "lists of parts received at the Main Plant" during the said periods. The endeavour of learned counsel was to show that some of the auto components received in KDP Plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions, which provided for removal of inputs as such from factory, there was a "fiction" of such inputs having been "manufactured" in the factory. Further, on the strength of the Apex Court's judgment in CIT Madras v. Urmila Ramesh - AIR 1998 SC 2640, ld. counsel urged that the legal fiction should be given full effect to. In other words, the auto components procured into KDP Plant and removed as such for export should be "deemed to have been manufactured" at the said "plant" and, accordingly, reversal of Cenvat credit taken on such components should be dispensed with. In this connection, it was also pointed out by learned counsel that KDP Plant was a part of the registered factory premises during most part of the period of dispute. He submitted that any activity undertaken in such premises was liable to be considered as part of manufacture of the final product. 5. Ld. SDR, on the other hand, referred to Order-in-Original No.12/2002 passed by the Asst. Commissioner and restated the facts of the case as spelt out therein. The case of the Revenue, as made out by her, is that only trading activity was undertaken at KDP Plant and, therefore, the auto components received there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to bought out inputs and capital goods which were exported as such. The rules and circulars referred to by learned counsel were applicable only to situations involving removal of inputs as such from factory but, in this case, there was no such removal as KDP Plant was not 'factory'. SDR also referred to the Tribunal's Larger Bench decision in the case of Eicher Tractors v. CCE, Jaipur, 2005 (189) E.L.T. 131 (Tri.-LB), wherein it had been held that, where inputs on which Cenvat credit had been availed were cleared as such from factory, the credit should be reversed. 6. In his rejoinder, learned counsel pointed out that the Tribunal's decision in the case of K.C.P. Ltd. had been stayed by the Supreme Court in Civil Appeal No. 5509-5510 of 2003 vide 2004 (163) E.L.T. A41 (S.C.) and 2004 (168) E.L.T. A121 (S.C.). 7.1 After giving careful consideration to the submissions, we find that there are certain crucial facts which are not in dispute. The appellants were main tai what was called "KDP Plant" for the purpose of receiving bought-out auto components (coated with rust-proof oil) and random-testing, sequencing and packing/palleting the same for the purpose of export under Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of this fact, the activity undertaken at KDP Plant during the relevant period was liable to be treated as "manufacture". This argument cannot be accepted inasmuch as, for any premises to be called "factory", it should also be shown that manufacture of any excisable goods or any process connected with such manufacture is carried on in such premises or in any part thereof vide Section 2(e) of the Central Excise Act which defines "factory" as under: "factory" means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried or is ordinarily carried on As per Section 2(f) of the Act, "manufacture" also include "any process incidental or ancillary to the completion of a manufactured product". The appellants manufactured cars in their factory. They have not shown that the activity under taken at KDP Plant was a process connected with or incidental or ancillary to the production of cars in the factory. The quality-checking, sequencing, packing/palleting etc. of bought-out components, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture" applicable to inputs removed as such from a factory under Rule 57F(1) (ii) or under Rule 57AB(1) (b) with Explanation thereto or under Rule 57AB(1C) would not be applicable to the goods in question viz, the bought-out components exported from KDP Plant. For the same reason, the Board's circulars relied on by ld. counsel would also not be of any support to the appellants. 7.5 It appears from the records that, in reply to a representation from the appellants, the Board in a letter dated 30-1-2002 clarified that, when the goods procured solely for the purpose of export and were not intended for use in the manufacture of final products, Cenvat credit was not available The view taken by the Board, not challenged by the appellants, is binding on them 7.6 Any input for Cenvat credit should be brought into factory for being used in, or in relation to, manufacture of final product. If, for any reason, it cannot be so used after having been brought into factory, it may be removed as such for home consumption on payment of duty or may be removed for export under bond without payment of duty. On the other hand, if any goods, usable as input in the manufacture of final prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was admitted by Sh. J. Arun, Manager (Export Operations) and confirmed by Sh. R. Saranyan, Manager (Taxation) and also corroborated by Sh. K.J. George, Plant Manager, TVS, i.e., purchasing auto components from the market and exporting the same after random quality check, sequencing and palleting. It was on this basis that the original authority de-registered KDP Plant, and the appellants are not aggrieved by the same. It has been established by the Revenue that the appellants had been irregularly availing Cenvat credit on the components traded by them. This conduct of the party attracted penal provisions of Rule 173Q of the Central Excise Rules, 1944 and the corresponding provisions of Cenvat Credit Rules, 2001. The following penalties were imposed by the original authority and sustained by the Commissioner (Appeals): (a) Rs. 10 lakhs where the demand of duty is to the tune of Rs. 4.09 crores for the period, 7-6-2000 to 31-3-2001; (b) Rs. 20 lakhs where the demand of duty is to the tune of Rs. 7.53 crores for the period, 1-4-01 to 31-12-01; (c) Rs. 25 lakhs where the demand of duty is to tune of Rs. 8.15 crores for the period, 1-1-02 to 31-10-02. In our view, the penalty o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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