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of <h1>Tribunal: Testing rejected goods not manufacturing; Cenvat credit reversed.</h1> <h3>Jakap Metind Pvt. Ltd. Versus Commissioner of Central Excise, Pune-III</h3> Jakap Metind Pvt. Ltd. Versus Commissioner of Central Excise, Pune-III - 2015 (329) E.L.T. 485 (Tri. - Mumbai) Issues:1. Availing Cenvat credit on rejected goods subjected to process.2. Applicability of Rule 16(2) of Central Excise Rules.3. Invocation of extended period of limitation.4. Interpretation of the term 'manufacture' in the context of testing rejected goods.5. Imposition of penalty under Section 11AC read with Rule 25 of Central Excise Rules.Analysis:Issue 1: Availing Cenvat credit on rejected goods subjected to processThe appellant, a manufacturer of motor vehicle parts, availed Cenvat credit on rejected duty paid goods, namely brass components. The Revenue contended that the process of converting rejected goods into scrap did not amount to manufacture, requiring the appellant to pay back the Cenvat credit. The appellant argued that the process of melting rejected goods into brass bars qualified for availing Cenvat credit, citing relevant case laws. The Tribunal held that the process of testing rejected goods after receipt did not amount to manufacture, thus requiring the appellant to reverse the Cenvat credit availed under Rule 16(1) on the cleared goods.Issue 2: Applicability of Rule 16(2) of Central Excise RulesThe Revenue issued a show cause notice demanding payment under Rule 16(2) for the period Sept. 2005 to March 2009, alleging that the process on rejected goods did not constitute manufacture. The appellant contended that the demand was time-barred and disclosed the process in their returns and Books of Account. The Tribunal found no suppression or contumacious conduct, ruling that the extended period of limitation was not applicable, confining the demand to the normal period from the date of the show cause notice.Issue 3: Invocation of extended period of limitationThe appellant argued that the majority of the demand was hit by limitation as they had informed the Revenue about the process of converting rejected goods into scrap. The Tribunal agreed that there was no suppression or contumacious conduct, leading to the conclusion that the extended period of limitation was not invocable.Issue 4: Interpretation of the term 'manufacture' in the context of testing rejected goodsThe Tribunal analyzed whether the process of testing rejected goods constituted manufacture. It was held that the testing process did not amount to manufacture, leading to the requirement for the appellant to reverse the Cenvat credit availed under Rule 16(1) on the cleared goods.Issue 5: Imposition of penalty under Section 11AC read with Rule 25 of Central Excise RulesThe Tribunal set aside the penalty imposed under Section 11AC read with Rule 25 of Central Excise Rules, considering the issue interpretational in nature and finding no suppression or contumacious conduct on the part of the appellant.In conclusion, the appeal was allowed in part, with the appellant entitled to consequential relief in accordance with the law.
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