By TIOL News Service

MUMBAI, JUNE 14, 2017: THE appellants are engaged in the manufacture of 'files' [CSH8203 1000].

They received duty paid files from the other unit and thereafter the same was exported along with own manufactured files under bond/on payment of duty.

CENVAT credit was availed on the files received from the other unit.

Revenue is of the view that since the appellants have not carried out any manufacturing activity on the duty paid files received, the same cannot be considered as inputs and, therefore, the credit is not admissible.

Credit was disallowed by the lower authorities and an appeal came to be filed before the CESTAT.

It is submitted that credit is taken in terms of Rule 16 and while exporting the said goods, they have discharged the excise duty. Moreover, there is no merit in the argument of the department that rule 16 cannot be applied since there is no manufacture involved because rule 16 permits receipt of duty paid goods for conducting the activity of repairing, reconditioning, remaking or for any other reason. Reliance is placed on the decisions in Uttam Galva Steels Ltd - 2016-TIOL-437-CESTAT-MUM, Ajinkya Enterprises - 2012-TIOL-578-HC-MUM-CX, Narmada Chematur Petrochemicals Ltd - 2004-TIOL-113-SC-CX-LB.

The AR emphasized that in the show-cause notice there is allegation that the appellants have paid excess duty while clearing the same and, therefore, they have violated the condition of Rule 16. It is further submitted that Rule 16 only permits to receive the duty paid goods for the purpose of repairing, reconditioning, remaking whereas in the present case the appellants have not carried out any such activity and the goods are resold as such, therefore, they are not entitled for CENVATcredit.

The Bench extracted rule 16 of the CER and observed -

"5. On a plain reading of the above Rule 16 it is provided that the manufacturer can receive the duty paid goods not only for activity such as repairing, reconditioning, remaking but for any other reason, the only condition is required that at the time of clearance of such goods the equal amount of cenvat credit has to be paid if there is no activity which amounts to manufacture. This provision itself shows that there are two situations one, the activity amounts to manufacture and other, activity which does not amount to manufacture. The appellants' case falls in the second category. Therefore, whether any activity is carried out or otherwise if the activity does not amount to manufacture, the credit is admissible in terms of Rule 16 of Cenvat Credit Rules, 2002. Accordingly, even though the appellants have not carried out any activity but the goods were cleared as such they are entitled for the cenvat credit in terms of Rule 16. As regards the contention in the show-cause notice and submission of the ld. AR that they encashed the cenvat credit by utilising the excess credit, I am of the view that if that is the case, the department should have taken action for denial of the rebate claim. As far as the availment of cenvat credit is concerned there is no violation, therefore, the appellants is entitled for cenvat credit in terms of Rule 16."

The impugned order was set aside and the Appeal was allowed.

(See 2017-TIOL-2013-CESTAT-MUM)