TMI Blog2008 (10) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... cals. 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 output services, as the case may be, shall pay an amount equal to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh 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) That the order has been passed on the basis of suspicion and presumption. (ix) That neither Rule 15(1) of Cenvat Credit Rules nor Rule 26 of Central Excise Rules, 2002 was attracted in this case. (x) The order is ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Rings on PU Casting Machine. (b) Curing of casted pieces is done for 1 hr. (c) Post-curing is done for 6 hrs. After post-curing the rings are inspected at the following manner : (i) Visually, Shifting, Finishing, (ii) Dimensions, and (iii) Physical properties (like tensile strength, elongation at break as per specification No. WD-38-Misc-2004. On doing the above exercise if found O.K. the Constant Contact polyurethane Side bearer pad is assembled. After assembly the same is again inspected for the following : (i) Height ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 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 noticed during manufacture in case of Asahi India Safety Glass Ltd. v. UOI - 2005 (180) E.L.T. 5 (DEL HC DB). The similar issue has also been examined in the case of Ashok Leyland Ltd. v. CCE, 1996 (83) E.L.T. 364 (CEGAT) and it was held that it is not essential that waste must arise from processing of inputs. It is applicable in case of components which becomes defective because of use in conjunction with the final product. Cenvat credit will be admissible if inputs become waste during manufacture of final product. In the light of the above findings, I observe that in the instant case appellant is engaged in production of locomotive parts of railway only, with quality specification provided by RDSO. From production flow chart of the appellant, it is evident that appellant is procuring rough shape steel forgings as inputs, which were subject to the process of machining. And further appellant have claimed that during process of machining in order to remove the cracks ..... X X X X Extracts X X X X X X X X Extracts X X X X
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