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2024 (4) TMI 30 - AT - Central ExciseProcess amounting to manufacture - manufacture and clearance of excisable goods such as modems, converters, ethernet switch, ISDN terminals, multiplexes etc. in their own brand name falling under Chapter heading 851762 of the Central Excise Tariff Act, 1985 - duty paid after availing cenvat credit of the CVD paid on imported modems from the manufacturing unit at 29B/1 is permissible or not - CENVAT Credit on inputs used in manufacturing of finished goods under CENVAT Credit Rules, 2004 - violation of Rule 8(3A) of the Central Excise Rules, 2002 - levy of penalty. Whether the activities carried out by the appellant on the imported Modem at their Registered trading premises at 29B/3 resulted into ‘manufacture’ as per Section 2(f)(iii) of Central Excise Act, 1944? - HELD THAT:- A plain reading of the extended meaning of ‘manufacture’, it is clear that for the goods specified in Third Schedule, the activities of packing or repacking of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of the retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer have been considered as amounting to ‘manufacture’ even if the said activities do not fall under main part of Section 2(f). Modems are specified at Sl.No.81A of the Third Schedule to the Central Excise Act, 1944. A careful analysis of the activities undertaken by the appellant from the dealers premises, it reveals that the imported modems were not simply cleared ‘as such’ but it has been opened, tested (for whatsoever reason); the purpose is not only visual inspection as a formality, but tested by qualified engineers which necessarily includes, if damaged or any manufacturing deficiency, to repair/remove the same, to put in saleable condition; the tested modems then repacked in the boxes and placed in bigger cartons along with other modems, accessories which would make the modems marketable, procured and supplied along with the modems after affixing the logo and labelling the modems with appellant’s name and address. These activities definitely relevant and necessary for marketing the product to the end consumer. In similar circumstances for the product, ‘switch gears’, this Tribunal in the case of HPL Electronic & Power Ltd. [2018 (2) TMI 223 - SC ORDER] held that the activities of packing and repacking, labelling and relabelling of switch gear amounts to manufacture within the definition of Section 2(f)(iii) of the Central Excise Act, 1944 - the activities carried by the appellant in the premises at 29B/3 on imported modems would result into ‘manufacture’ within the meaning of Section 2(f)(iii) of Central Excise Act, 1944. Consequently, the appellant are required to discharge duty on the imported modems for the aforesaid activities in their trading premises, which amounts to manufacture. Whether the duty paid after availing cenvat credit of the CVD paid on imported modems from the manufacturing unit at 29B/1 is permissible? - HELD THAT:- When the Department examined the processes/activities carried out by the appellant opined that the activities would result into deemed ‘manufacture’; hence duty is payable, therefore in all fairness, the dealer’s Registration for the said premises belonging to the appellant ceases and the trading premises became manufacturing premises as there is no other items other than ‘modems’ which was traded from the said premises - there are no irregularity in availing the cenvat credit even though the input-modems had already sold/cleared by the appellant. Further, when there is no dispute that the imported modems earlier received and cleared from trading premises; the credit subsequently availed only for the purpose of discharging duty leviable on the ‘modems’, when the activities found to be ‘manufacture’ under Section 2(f)(iii) of Central Excise Act, 1944. However, the excess credit that remained in balance after debiting the credit equal to the duty payable on the imported modems, and utilised for the clearance of their own manufactured modems at the manufacturing premises, is definitely inadmissible, as the said excess credit attributable to imported modems had already been passed on by the Appellant to their customers while selling the imported modems, by issuing dealer’s invoice. Now, availing the same credit again and utilising it for clearance of indigenous modems and other goods manufactured in the manufacturing premises, would result in availing and utilising cenvat credit twice on the same amount of CVD and other duties relating to imported modems, that is, once mentioning in the dealer’s invoice and second time in the manufacturer’s invoice while clearing the manufactured goods from the manufacturing premises. The said excess credit has been subsequently paid by the appellant by debiting their PLA account with interest and the ld. Commissioner has rightly appropriated the same in the order. Whether the Appellant contravened Rule 8(3A) of the Central Excise Rules, 2002 in discharging the duty by utilising the credit from their manufacturing unit situated at 29B/1? - HELD THAT:- As contended by the Ld. Advocate for the Appellant since Rule 8(3A) of the Central Excise Rules, 2002 has been held to be ultra vires of the rule making power by the Hon’ble Gujrat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA & 2 [2014 (12) TMI 585 - GUJARAT HIGH COURT], therefore, the findings of the learned Commissioner on this count also cannot be sustained. Levy of penalty - HELD THAT:- The issue involved in the present case is interpretation of law, and consequent actions of debiting the duty from cenvat credit account maintained in the manufacturing premises was after due intimation to the Department, therefore imposition of penalty on the appellants is unwarranted and accordingly set aside. Appeal disposed off.
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