TaxTMI 
TaxTMI 
2008 (10) TMI 431
X X X X Extracts X X X X
X X X X Extracts X X X X
....ished product are Iron and Steel, Steel forgings, Rubber and Chemicals. M/s. Aryan Exports (P) Ltd., vide their letter dt. 27-3-2006 informed the Superintendent, Range, Sarojini Nagar, Lucknow, that due to difference in size and Blow Holes, 7574 Nos. of Roughly shaped steel forging had been rejected at their factory premises and they were selling these forgings as scrap. Since the party had already taken and utilized Cenvat credit of amount paid as duty on forgings received by them, they were asked to reverse the amount equivalent to the difference between the Cenvat credit paid as duty on the said forgings and the amount involved on the forgings cleared by them as scrap. But the party did not reverse the differential duty. As per the provisions of Cenvat Credit Rules, 2004, a manufacturer of final products may take credit of duty paid on inputs, capital goods or service tax used in or in relation to final products and utilize the same towards payment of Central Excise duty or service tax liable on the final products or output services whichever is applicable. Further as per sub-rule (5) of Rule 3 of Cenvat Credit Rules, 2004, the manufacturer of final products or provider of outpu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith regard to quality. (iii) Appellants were procuring roughly shaped forging which is manufactured by heating them hammering : using a dye and hammer, no rough forging can be put to use without undergoing process of machining and grinding. (iv) For supply to Indian Railways, RDSO has prescribed mandatory norms with regard to procurement of its quality, and no supply can be made to Indian Railways without inspection of RDSO. (v) That neither the forging manufactured as per RDSO specification nor Polyurethane Side Bearers has got any alternative use other than Railway wagon. (vi) That the process of machining and grinding on inputs are amount to manufacture under Section 2(f) of the Central Excise Act, 1944. (vii) That after having rendered the process of machining and grinding the rough shape steel forging loses the identity of being called as input as such undertaking of said process drags the product out of ambit of Rule 3(5) of Cenvat Credit Rules, 2004 which says an amount equal to Cenvat credit availed is required to be paid if input or capital goods removes from the factory as such. (viii) Tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also inspected by the RDSO. Thus, from above, it is clear that appellant is engaged only in the manufacture of goods for Indian Railways under strict supervision of quality control by RDSO. (ii) The sequence of production of constant contact polyurethane side bearer pads (finished goods) of appellant as supplied by appellant is discussed below :- A. First of all we receive unmachined forging then machining and grinding is done to bring the forging to the specified sizes as per RDSO. Approved Drg. INSPECTION : After machining, inspection is done for 1. Visual 2. Dimensions for cracks & blow holes. (i) Visual Inspection : In visual inspection we inspect (a) cracks (b) Radius (c) Finishing and (d) Blow Holes. (ii) Dimensions : The dimension of the machined forging is also checked. After the above procedure the material is painted. B. On other hand we receive PU Raw material for rings and the following is the procedure for production : (a) Casting of PU R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O v. Union of India, 1988 (35) E.L.T. 605 (S.C.). Further Hon'ble Tribunal in the case of Bhartia Electricals, 1996 (67) ECR-823 (Tri.) has held that grinding and machining of the casting to make product exact specification amount to manufacture. (iv) It is settled law that if quality control test are required for marketing of the final products, they are considered in process of manufacture. Further, it has also been held that if inputs are used for quality testing before manufacture are eligible for Cenvat credit, in case of Kirloskar Electric Co. Ltd. v. CCE, 2006 (3) STT 240 (CESTAT) it was held that some inputs were used for quality testing during course of manufacture of final product, Cenvat credit is allowable on such inputs as it is essential for process of manufacture - relying on Biddle Sawyer v. CCE, 2004 (168) E.L.T. 119 (CESTAT) and CCE v. Birla Tyres, 2001 (138) E.L.T. 168 (CEGAT). (v) Now I have taken up the issue that whether the Cenvat credit is allowable, if input becomes waste during the process of manufacture, in number of judgments by the higher courts, it has been held that Cenvat is allowable, if defect in input was ....