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TMI Blog2018 (3) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant that once the process of testing and inspection is complete, the procured items would no longer be called "Traction Motor" and "Vacuum Circuit Breaker" and that they would be influenced by any other nomenclature. The adjudicating authority has correctly analysed various issues involved and has come to a reasoned conclusion that the processes carried out by the appellant will not amount to a manufacturing process. Extended period of limitation - Penalty - Held that: - It is not the case that appellant had sought any clarification from the department on whether the manner in which they intend to discharge duty liability on the impugned items was correct as per law. Appellant not only did not disclose the activities done by them on these inputs but at the same time declared the clearances of the items as "manufactured products" in the monthly returns which is tantamount to misdeclaration and suppression of facts - invocation of extended period of limitation for demand of duty liability is very much in order - penalty also upheld. Appeal dismissed - decided against appellant. - E/663/2009 - A/40111/2018 - Dated:- 17-1-2018 - Ms. Sulekha Beevi C.S. Member (J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 3 (5) of Cenvat Credit Rules, 2002 / 2004 respectively. The total credit availed on the said inputs during the period from November 2003 to March 2005 worked out to ₹ 1,88,42,922/-. Further, on scrutiny of ER-1 Monthly Returns pertaining to the period November 2003 to March 2005 filed by the assessee, it appeared that appellant declared the said items namely 'Traction Motors' and 'VCB' as 'manufactured products' and availed duty exemption in terms of Notification 29/2003-CE dated 01.04.03 and paid only an amount equal to 8% or 10% of the price of the said items sold to M/s.Mitsubishi Corporation. Thus, while receiving 166 Nos. of Traction Motors and 52 Nos. of VCB, in their factory at Coimbatore, they availed credit @ 16% but when the same items were cleared 'as such' from their unit, they paid only 8% on the price of the goods. It therefore appeared to the department that appellants had wilfully misdeclared the said items as manufactured products with the sole intention of evading payment of amount equal to the cenvat credit availed on the said inputs and wilfully suppressed the above facts from the knowledge of the department with an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MRTS Project. When seen so, it is clear that there was no removal of Cenvat credit availed goods a such. ii) Assuming without admitting that the traction motor and vacuum circuit breaker were cleared as such, even then, the provisions of Rule 3(4) / Rule 3(5) will come into play because that two equipment are part and parcel of the larger equipment meant for the DMRC. The whole equipment removed under different invoices for the project as a whole is to be seen. An equipment may consist of some of the manufactured item and some other directly procured item; the whole product is to be seen and not in isolation. iii) There was no as such removal of traction motor and vacuum circuit breaker. These were subjected to extensive quality control tests and performance tests and matching tests. The tests include routine test, di-electric test and characteristics test to find out the marketable quality and compatibility to function in the equipment. Therefore, the two impugned items were not removed as such to attract the provisions of Rule 3(4) / Rule 3(5). The fact that the goods are removed after the process of testing is not in dispute. iv) The impugned goods fall unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from their sister units cleared to DMRC. The adjudicating authority has not found any mention in these invoices to indicate that these clearances were made as a part of the 'Traction Equipment' or any other Original Equipment. The said goods have actually been cleared as independent items which can also be to be treated as spares. Hence the contention that goods are cleared as part and parcel of traction motor is incorrect. 6.2 With regard to the appellant's plea concerning that goods are subjected to process of testing and quality inspection, such processes cannot be equated with any activity to bring about any change in the goods. The goods which are cleared by the sister unit and received by the appellants were complete and finished goods by themselves. Hence the credit in respect of credit availed inputs which should have been removed and cleared as such from the factory without undertaking any manufacturing activity the confirmation of amount equivalent to the cenvat credit availed on the goods is very much in order. 7.1 Heard both sides and have gone through the facts. The main argument made by the appellant is that the traction motor and vacuum c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of intensive testing. For that matter, we are not able to identify any process or processes carried out by appellant which bring about lasting or permanent change in the characteristics or functionality of the impugned items. It is also not the claim of the appellant that once the process of testing and inspection is complete, the procured items would no longer be called Traction Motor and Vacuum Circuit Breaker and that they would be influenced by any other nomenclature. 7.3. The appellants have also relied upon Chapter Note 6 to Section XVI of the Central Excise Tariff Act to buttress their stand. However, we find that the said reliance is misconceived since that Note lays down that conversion of incomplete or unfinished goods into complete or finished goods amounts to manufacture . As already found, it is nobody's claim that the said items supplied the appellant's sister unit are not complete in all respects or that they are unfinished to any degree. There is certainly no process being undertaken by the appellant to complete the manufacture of those items or to complete any incomplete or unfinished goods into complete or finished goods. 7.4 In the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether the resultant product which emerges after carrying out the said process is a new and different product having its own identity and but for the said process the various inputs could not have been used as such. Here there is no emergence of any new product. Further, there is no completion of any incomplete or unfinished goods into complete goods or finished goods. Also no evidence has been brought on record by the assessee to the effect that the goods at the time of clearance from their sister units were not complete or unfinished goods. Here not only the process undertaken by the assessee after receipt of the goods at their factory but even the literature submitted by them along with reply to the notice explaining the various stages of testing did not help to arrive at a conclusion that the activity undertaken at their premises was a manufacturing activity. The received inputs namely Traction Motor and Vacuum Circuit Breaker very much remain the same and the activities performed by the assessee do not cover the definition of manufacture under Section 2(f) of Central Excise Act, 1944. In view of the facts brought on record any argument to the contrary is not legally sus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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