Complete dismantling and further re-making amounts to manufacture; appellant was not required to reverse Cenvat credit under Section 16(2) of Central Excise Rules: CESTAT

Customs, Excise & Service Tax Appellate Tribunal (CESTAT): A Division Bench comprising of Ashok Jindal Member (Judicial) and Anil G. Shakkarwar Member (Technical) set aside the impugned orders passed by CCE (Chandigarh- I).

The appellant was engaged in the manufacture of Tractors and w.e.f. 09-07-2004 the tractors were exempted from levy of excise duty. They also used to get tractors cleared from the factory back into the factory for removal of defects.

The appellant received tractors for removal of defects under provisions of Rule 16 (1) of Central Excise Rules, 2002 and after the defects were cured, the tractors were cleared after 09-07-2004 without having paid any central excise duty on clearance of the same nor reversing the Cenvat credit availed on receipt of the same into the factory.

It was contended by the respondents that the said tractors were not subjected to the processes amounting to manufacture and therefore in terms of Rule 16 of sub-rule (2) of Central Excise Rules, 2002 the appellant required to reverse the Cenvat credit availed on receipt of the said tractors into the factory.

The appellant stressed upon the fact that the said tractors were not repaired but were once again totally remade and manufactured and hence it was not required of reversal of the availed Cenvat credit or requirement of payment of central excise duty.

In the light of the facts stated therein, the Court stated that the returned tractors were stripped of external assemble and then put on assemble line. Therefore, the process amounted to manufacture. Thus the appellant was allowed consequential relief as per law. [Punjab Tractors v. CCE, 2018 SCC OnLine CESTAT 3246, order dated 05-09-2018]

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