2015 (1) TMI 1040 - AT - Central Excise

Tribunal allows Cenvat credit for re-manufacturing Colour Picture Tubes

The Tribunal ruled in favor of the appellant, holding that they correctly availed Cenvat credit on inputs used in re-manufacturing Colour Picture Tubes. ... Manufacture - Cenvat credit - Rule 16 of the Central Excise Rules, 2002 - duty on clearance of repaired/remade goods - extended period under proviso to Section 11A(1) - suppression / non-disclosureManufacture - Cenvat credit - Rule 16 of the Central Excise Rules, 2002 - Entitlement to Cenvat credit on fresh inputs used in remaking defective Colour Picture Tubes (CPTs) returned under Rule 16. - HELD THAT: - The defective CPTs returned under Rule 16 were dismantled, salvaged parts were reused and fresh parts incorporated, and the entire process of producing fresh CPTs was carried out on the same production line with the resultant goods cleared on payment of duty. Rule 16 permits taking Cenvat credit of duty originally paid when duty-paid goods are returned for repair/remake, and distinguishes between processes amounting to manufacture and those not amounting to manufacture at the time of clearance; there is no provision excluding Cenvat credit for inputs used in repair/remake where the process amounts to manufacture. The Tribunal relied on earlier decisions holding similar processes to be manufacture (Maruti Udyog Ltd. v. CCE, Delhi-III and CCE, Ahmedabad v. Tudor (I) Ltd.) and found that the appellant had disclosed the nature of the process to the department as early as May 2001, negating any allegation of suppression. Applying these principles to the facts, the re-making process was held to amount to manufacture and hence the appellant was correctly entitled to Cenvat credit on inputs used in the re-making.Cenvat credit availed by the appellant on inputs used in re-making the defective CPTs is upheld; the impugned order is set aside and the appeal is allowed.Extended period under proviso to Section 11A(1) - suppression / non-disclosure - Validity of invocation of extended period and allegation of suppression in relation to the Cenvat credit demand. - HELD THAT: - The extended period under the proviso to Section 11A(1) had been invoked by the adjudicating authority. However, the appellant had disclosed the process of receipt and re-making of defective CPTs to the department as early as May 2001, and therefore the department could not legitimately contend suppression or non-disclosure to justify extended period invocation. In view of the finding that the re-making amounted to manufacture and that disclosure had been made, the basis for invoking the extended period and related penalties was negated.Invocation of the extended period and the consequent demand/penalty based on alleged suppression cannot be sustained; related findings in the impugned order are set aside.Final Conclusion: The Tribunal held that the re-making of defective CPTs (dismantling, salvaging parts and using fresh parts to produce new CPTs) amounted to manufacture under Rule 16, entitling the appellant to Cenvat credit; disclosure to the department defeated any allegation of suppression and invocation of the extended period, and the impugned adjudication is set aside and the appeal is allowed with consequential relief. Issues:1. Availing of Cenvat credit on inputs used in re-manufacturing of Colour Picture Tubes (CPT)2. Dispute regarding whether re-making of CPTs amounts to manufacture3. Allegation of suppression of facts by the department4. Application of Rule 16 of the Central Excise Rules, 2002Issue 1: Availing of Cenvat credit on inputs used in re-manufacturing of Colour Picture Tubes (CPT):The appellant availed Cenvat credit of duty paid on inputs used in or in relation to the manufacture of picture tubes. The department alleged that since some Cenvat credit availed parts/inputs were used in the re-making of the CPTs, and re-making does not amount to manufacture, the appellant should not be entitled to Cenvat credit for the fresh parts used. A show cause notice was issued seeking recovery of the allegedly wrongly taken Cenvat credit. The original adjudicating authority confirmed the demand, along with interest and penalty. The appellant contended that as per Rule 16 of the Central Excise Rules, 2002, they were entitled to take Cenvat credit on inputs used in the process of repairing/remaking. The Tribunal held that the appellant had correctly availed the Cenvat credit on inputs used in re-manufacturing of the CPTs.Issue 2: Dispute regarding whether re-making of CPTs amounts to manufacture:The department argued that the process undertaken by the appellant in re-making the defective CPTs did not amount to manufacture. They relied on previous Tribunal judgments to support their contention. However, the appellant cited Tribunal judgments in similar cases where re-making of defective goods after dismantling them and using salvaged parts was considered as manufacture. The Tribunal found merit in the appellant's argument and held that the process of re-making the CPTs amounted to manufacture, thus justifying the availing of Cenvat credit on fresh parts used.Issue 3: Allegation of suppression of facts by the department:The department alleged suppression of facts by the appellant regarding the availing of Cenvat credit on inputs used in re-making the goods. However, the Tribunal noted that the appellant had disclosed the process undertaken as early as May 2001, in respect of the defective CPTs received from customers. Therefore, the department's claim of suppression of facts was dismissed, and the appellant's disclosure was considered timely and sufficient.Issue 4: Application of Rule 16 of the Central Excise Rules, 2002:The Tribunal analyzed the provisions of Rule 16, which allow manufacturers to take Cenvat credit of duty originally paid on goods returned for repair, remaking, etc. The rule specifies that if the process undertaken amounts to manufacture, the manufacturer must pay the duty chargeable on the goods at the applicable rate. The Tribunal found that Rule 16 did not prohibit the availing of Cenvat credit on inputs used in the process of repairing/remaking. Based on the interpretation of Rule 16 and relevant Tribunal judgments, the Tribunal set aside the impugned order, allowing the appeal with consequential relief.In conclusion, the Tribunal ruled in favor of the appellant, holding that they correctly availed the Cenvat credit on inputs used in re-manufacturing the Colour Picture Tubes. The Tribunal determined that the process of re-making the CPTs constituted manufacture, as supported by Rule 16 and relevant Tribunal precedents. The allegation of suppression of facts was dismissed, and the appellant's disclosure was deemed timely. The impugned order was set aside, and the appeal was allowed with consequential relief.