Sale of excess manufacturing input is not trading activity where goods were procured for consumption and duty was paid on clearance.

Excess imported manganese ore originally procured for manufacture and mostly consumed in production was not treated as trading activity merely because the surplus was later sold. The analysis distinguished clearance of inputs as such from trading, noting that trading requires buying, stocking, storing and reselling goods as a commercial activity. As the record showed procurement for consumption and no finding that the goods were bought for trading or that the clearances constituted exempted services, no reversal or payment under the CENVAT Credit regime was warranted. The demand raised on a trading basis was therefore unsustainable.

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Issues: Whether the sale of excess imported manganese ore, procured for consumption in manufacture, could be treated as trading activity so as to attract reversal or payment under the CENVAT Credit regime.

Analysis: The respondent had imported manganese ore for use in manufacture, consumed most of it in production, and sold only the excess quantity. The statutory scheme distinguished between inputs cleared as such and trading activity. Where inputs are procured for consumption and later cleared as such on payment of duty in accordance with the Rules, such clearance cannot be equated with trading, which in its ordinary sense involves buying, stocking, storing, and reselling goods. The record also did not show any finding that the respondent had procured the goods for the purpose of trading or that the clearances were in the nature of exempted services.

Conclusion: The sale of excess raw material was not trading activity, and the demand raised on that basis was unsustainable.

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