By TIOL News Service

CHENNAI, JUNE 03, 2016: THIS is a revenue appeal against the order of the CESTAT reported in 2007-TIOL-1167-CESTAT-MAD. Vide the impugned order, the Tribunal held that the disputed processes of testing and packing undertaken by the assessee are the final steps in a series of processes involved in the manufacture of the impugned goods starting with pig iron/steel scrap in the factory of the manufacturer and continued with the work undertaken by their job workers. It is not proper to see testing and packing in isolation. Considering the processes undertaken by the appellants on the inputs, pig iron, steel scrap and chemicals etc. and those before ultimate export of automotive parts, it cannot be held that the assessee had exported the inputs procured as such and credit cannot be denied.

Revenue carried the matter before the High Court, with the following question of law:

Whether the CESTAT is correct in holding that the impugned goods became fully manufactured goods in the premises of the appellants particularly when the appellant had admittedly done only testing and packing of the goods in their premises, which do not amount to manufacture in terms of Sec.2(f) of the Central Excise Act, 1944 as no new product has emerged?

After hearing both sides, the High Court held:

+ The question of law raised by the Department proceeds to a wrong presumption that the assessee had done nothing except testing and packing. The question of law is thoroughly misconceived as it does not arise out of the facts of the case. The questions of law raised in other appeal also proceed on the premise that whatever has been done before the goods are received from the KTTM Ltd., (job worker) have to be completely forgotten. The contention is that since the invoices were raised and duty paid by the job worker, the chain is completely broken. According to the revenue, the stage at which the assessee claim CENVAT Credit involved mere testing and packing and hence the assessee was not entitled to claim CENVAT credit.

+ But this cannot be accepted. This is not a case where the assessee is attempting to claim CENVAT Credit twice over. Whatever credit was claimed by them before they sent it to KTTM Ltd., was actually reversed. Therefore, the credit was still available for the assessee to take. The Tribunal was therefore, right in this regard in holding that testing and packing were part of a series of steps undertaken by the assessee for the manufacture of the goods. Hence the questions of law that arise for consideration in these Civil Miscellaneous Appeals are also answered in favour of the assessee.

(See 2016-TIOL-1054-HC-MAD-CX)