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TMI Blog2018 (2) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as re-credit availed upon return of defective goods. They did observe the procedure as per the Trade Notice 108/LTU dated November, 2008 issued by Commissioner, LTU. We are dealing with a part of provision of Rule 16 (2). Having held that the appellants did not undertake any processes amounting to manufacture, we note the said Rule will apply in full force. Regarding the claim of the appellants that certain numbers of returned chassis upon removal of defects, have been cleared either on physical exports out of country or to supply to EOU or supply under N/N. 108/95 - Held that: - these products irrespective of the dispute under Rule 16 are otherwise eligible for clearance without payment. These can be verified from the documentary support that will be produced by the appellants - matter on remand. Penalty u/r 25 of CER - Held that: - there is a case for the appellants for claiming interpretation of the provisions of Rule 16 - penalty not justified. Appeal allowed in part - part matter on remand. - E/87 - 94/2011 - Final Order No. 40321-40328/2018 - Dated:- 31-1-2018 - Ms. Sulekha Beevi, Member (Judicial) And Shri B. Ravichandran, Member (Technical) Shri Rag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es undertaken on returned chassis will amount to manufacture. Accordingly, the differential duty demand was confirmed and penalties were imposed under Rule 25 of the CER 02. 3. The Ld. Counsel appearing for the appellants mainly submitted on the following lines:- a) He submitted that large numbers of chassis were returned from the depots due to various functional/mechanical defects. These were examined by the appellants in their premises. Wherever feasible these were subjected to replacement of parts, re-fixing of mechanical defects and were cleared following the provisions of Rule 16 which mandates reversal of retaken credit. However, in respect of chassis with serious mechanical defects, the appellants undertook the processes of dismantling and re-fixed all the required parts like engines, transmission system, steering wheel, axles, gear box, spring leaves etc. as per the requirement in each case. It is clear from the annexure to the notice itself that the components/parts replaced were all new and the goods which are cleared were in many cases identified with different model numbers and different product numbers. This is sufficient to show that the processes undertaken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present appeals. It is his submission that this is of purely interpretation of the issue involved on application of Rule 16 read that Section 2 (F) of the Act. There is reason for the appellant to have a bonafide belief regarding the processes amounting to manufacture and should suffer duty as a new product not under Rule 16. On this premise the penalties imposed were sought to be set aside. 4. The Ld. AR strongly opposed the appeals on the following lines:- a) The evidences brought forward during verification as well as in the SCN clearly brought out that what was done by the appellant is certainly replacement of defective parts including engines, steering wheel, axle etc. Replacement of all these components how so ever they are critical will not make re-manufacture of chassis. The products now under dispute are motor vehicle chassis. There is no evidence that these motor vehicle chassis were remanufactured. It is only various critical components like engine, gear box, steering wheel etc., found faulty were repaired or replaced depending upon requirement. The classification of the returned products as well as re-cleared products was the same. The in between process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the form of chassis with all the requirements of engine, transmission system. On close scrutiny of documents on record, we note that there is no total dismantling and re-manufacture of the impugned goods in the premises of the appellants. There is no supporting evidence to that effect. In fact, we have all the indications to show that only replacement of various components, though critical has been undertaken. These are engine, gear box, steering system, axles etc. These are no doubt critical components of a motor vehicle. But replacement of such items will not amount to manufacture of motor vehicle. Hence, we are in agreement with the lower authority on this aspect regarding application of Rule 16 to the clearances made by the appellant. Regarding the machinery to collect excess amount, we note Rule 16 of CER 02 provisions as below:- (1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an assessee under Rule 16. Admittedly, the appellants did follow the procedure under Rule 16 in so far as re-credit availed upon return of defective goods. They did observe the procedure as per the Trade Notice 108/LTU dated November, 2008 issued by Commissioner, LTU. We are dealing with a part of provision of Rule 16 (2). Having held that the appellants did not undertake any processes amounting to manufacture, we note the said Rule will apply in full force. 6.3 Regarding the claim of the appellants that certain numbers of returned chassis upon removal of defects, have been cleared either on physical exports out of country or to supply to EOU or supply under Notification No. 108/95, we note that these products irrespective of the dispute under Rule 16 are otherwise eligible for clearance without payment. These can be verified from the documentary support that will be produced by the appellants. Hence the differential credit/duty attributable to the said clearances shall not be liable to be paid by the appellants. 6.4. Dealing with the penalty imposed by the lower authority, we note that all the demands were issued in normal period and the penalties were issued under Rule 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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