Manufacture treatment for refurbished used machinery supports CENVAT credit on inputs and input services used in the process.

Repair and refurbishment of imported used tunnel boring machines was treated as manufacture on the same factual matrix in a subsequent proceeding, and that acceptance governed the present issue. On that basis, the process could not be characterised as non-manufacturing for denial of credit, because CENVAT credit on inputs and input services used in carrying out the manufacture was admissible. The operative principle stated is that once the department has accepted refurbishment of used machinery as manufacture on identical facts, credit attributable to the inputs and input services used in that process cannot be denied.

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Issues: Whether the repair and refurbishment of imported used tunnel boring machines amounted to manufacture, and whether CENVAT credit on inputs and input services used for such activity was admissible.

Analysis: The appeal turned on the substantive character of the activity undertaken on the imported used machines. The prior adjudication had not conclusively answered that question, but the record also showed that in a subsequent proceeding concerning the same respondent on an identical issue, the department accepted that the activity amounted to manufacture and acted upon that finding. Once the activity was treated as manufacture, the credit taken on inputs and input services used in carrying out that manufacture could not be denied on the premise that the process was non-manufacturing.

Conclusion: The activity amounted to manufacture and the respondent was entitled to CENVAT credit on the inputs and input services used for the process.

Ratio Decidendi: Where the department has accepted, on an identical factual matrix, that repair and refurbishment of used machinery amounts to manufacture, CENVAT credit attributable to inputs and input services used in that process is allowable.

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