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2018 (4) TMI 285

to be considered as inputs cleared as such - Rule 3(5) of CCR - Held that: - these tests as well as programming carried out within the factory are in the nature of acceptance testing i.e. to mean that the tests are required to ensure that the goods which are being cleared in the spare parts market satisfied the conditions which are prevailed in India. Without carrying out these tests, the imported Rectifiers are not considered fit for use in the Indian conditions. - As seen from the technical write up, of various processes carried out within the factory, we are of the view that the imported Rectifiers cannot be considered as cleared N as such'. These goods are cleared only after carrying out various tests which by themselves may not amo .....

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hours before clearing as to spare parts, The Department was of the view that the process carried out by the appellant within the factory do not bring about any new product and hence the Rectifiers are to be considered as inputs cleared N as such'. Accordingly Department issued show-cause notice by taking the view that the appellant is required to reverse the cenvat credit availed on such Rectifiers in terms of Rule 3(5) of the Cenvat Credit Rules which provides for payment of an amount equal to the credit availed in respect of such inputs. The adjudicating authority, vide his Order-in-Original No. 8/2008 dated 29008.2008 confirmed the demand of duty as above amounting to ₹ 55,07,239/- (Rupees Fifty Five Lakhs Seven Thousand Two H .....

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d indicate as to how the processes (as recorded hereinabove), are incidental or ancillary to a manufactured product. Before us also, the learned Counsel has only submitted that programming and burning test would be a test, which is to be considered incidental or ancillary to the manufactured product. We find that in the absence of any technical write up as to how the rectifiers, which were imported by the assessee, and the rectifiers cleared by the assessee, after undergoing the processes as indicated herein above, had resulted in a better rectifiers cleared from the assessee's unit. We are unable to accept the assessee's contention that the processes indicated herein above, would amount to process which is incidental or ancillary f .....

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d on, as per his bonafide belief that the rectifiers, which have undergone the test would amount to manufacture, has been discharging the Central Excise duty on mal products cleared from his factory. This act of the appellants cannot be considered as mis-statement or suppression of facts. If the Revenue authorities were entertaining any doubt about the manufacturing activity, they could have verified inspected, as the regular monthly returns were filed with them. In our considered view, the adjudicating authority is not justified in imposing equivalent amount of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. We are of the considered view that this penalty is unwarranted and .....

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hether the imported goods satisfy the specifications prevailing in India and its suitability for use within the country. The Rectifiers are also subjected to programming within the factory as per the specific requirements, The Rectifiers are cleared only after carrying out these processes to the spare parts market. It is his submission that these goods cannot be considered as goods cleared N as such', since the tests are carried out in the factory too and only those goods which satisfy the requirements are cleared out to the spare part market. Accordingly it is his submission that the goods will not be covered within the requirements of Rule 3(5) of the Cenvat Credit Rules, which will be applicable only to those inputs which are cleared .....

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itted that the imported goods which are cleared are being cleared as spare parts. The processes which are said to be carried out in the appellant's factory cannot be considered as processes incidental to the manufacture of the product since these are being cleared to the replacement market. 5. After hearing both sides and perusal of record, we note that the Hon'ble High Court has remanded the matter with the specific directions to examine the technical write up which was submitted by the appellant at the time of the appeal before the Tribunal in the last round of litigation. We have accordingly carefully considered the technical write up which is on record. In addition to the technical specifications of the Rectifiers which has been .....

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d \ as such'. In the present case, as seen from the technical write up, of various processes carried out within the factory, we are of the view that the imported Rectifiers cannot be considered as cleared N as such'. These goods are cleared only after carrying out various tests which by themselves may not amount to manufacture but are necessary to complete the manufacturing process of the imported Rectifiers. Such tests are considered by the appellant as necessary to ensure the quality of the products for use in the Indian market. In such a view of the matter there is no justification for demand of an amount in terms of Rule 3(5) of the Cenvat Credit Rules. 6.1. The processes carried out are in the nature of finishing process which .....

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