2026 (1) TMI 507 - AT - Central Excise

Repair and refurbishment of imported used tunnel boring machines treated as 'manufacture' u/s2(f), allowing CENVAT credit; appeal rejected.

The dominant issue was whether repair and refurbishment of imported used tunnel boring machines constituted 'manufacture' under s. 2(f) of the Central ... Process amounting to manufacture or not - process of repair and refurbishment undertaken by the Respondent on the imported used TBMs - availment of input credit by the Respondent on inputs used for carrying out the process of repair and refurbishment on the imported used TBMs - contravention of Rule 3 ofCENVAT Credit Rules, 2004 read with Rule 6 of the said Rules or not - suppression of facts or not - HELD THAT:- The Respondent has brought to notice that a similar allegation that the activity undertaken by the Respondent does not amount to manufacture within the meaning of Sec. 2 [f] of the Central Excise Act was decided in order-in-original No. 52/2017 dated 11.05.2017 where the learned Commissioner held that the said activity amounted to manufacture within the meaning of Sec. 2[f] of the Central Excise Act and on review of the same, the Committee of Chief Commissioners have concurred with the finding of the learned Commissioner and accepted the said order. Thus, it is accepted by the department that the activity undertaken by the Respondent amounted to ‘manufacture’. Respondent has also brought to notice that in another case of the Respondent, reliance has been placed by the learned Commissioner on the order-in-original No. 52/2017 dated 11.05.2017 to grant rebate on the export of one such machine. It is needless to mention that once the department has accepted that the Respondent is eligible to grant of rebate on export of TBM in the light of Order-in-Original No. 52/2017 dated 11.05.2017, it follows that the Respondent is eligible for Cenvat credit on the inputs and input services utilized for the activity of ‘manufacture’ of TBM in the light of the said order-in-original. The impugned Order-in-Original No. 04/2015 dated 10.09.2015 is upheld - the Revenue’s appeal is rejected being not maintainable. Issues: Whether the activity of repair and refurbishment of imported used tunnel boring machines amounts to 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944 and, consequently, whether CENVAT credit on inputs and input services used for that activity is admissible.Analysis: The legal framework requires determining whether the repair and refurbishment process produces a product that falls within the statutory concept of manufacture under Section 2(f) and whether CENVAT credit rules permit availing credit for inputs and input services used in that activity. Section 5B contemplates circumstances where an activity may be declared not to be manufacture and prescribes consequences for credit reversal; the CENVAT Credit Rules (including Rules 3, 6, 14 and 15(2)) and Sections 11A/11AB/11AC govern admissibility of credit, interest liability for wrong credit and penalty/demand procedures. The adjudicatory authority below did not decide the substantive manufacture issue, having relied on revenue-neutrality and limitation grounds to drop a duty demand. A subsequent co-equal adjudication accepted that the repair and refurbishment activity amounted to manufacture under Section 2(f), and that administrative acceptance was applied in related proceedings (including grant of rebate), indicating departmental concurrence with the manufacture finding. In view of that accepted determination at the same level of adjudication and its application in related matters, the appeal challenging the failure to decide the manufacture issue was rendered not maintainable.Conclusion: The activity of repair and refurbishment is to be treated as manufacture for the purposes of Central Excise law and the CENVAT credit on inputs and input services used for that activity is admissible; the departmental appeal is rejected as not maintainable.