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CX – Even though the activity is not manufacture, once the processed goods are cleared on payment of duty, which is more than the CENVAT availed, Revenue should have no grievance: CESTAT

2019-TIOL-2095-CESTAT-AHM

IN THE CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD

Appeal Nos. E/102-104/2011-DB

Arising out of OIO no. 05/MP/DAMAN/2010, Dated: 29.09.2010 and
Passed by Commissioner of Central Excise, Customs and Service Tax-DAMAN

Date of Hearing: 12.02.2019
Date of Decision: 12.02.2019

UNIGLOBE PACKAGING PVT LTD
RAJIV THAKUR THADANI
DATTATRAY VITTHAL SALUNKHE

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
DAMAN

Appellant Rep by: Shri T C Nair, & Shri Nitin N Mehta, Advs.
Respondent Rep by: Shri K J Kinariwala, Asst. Commr. AR

CORAM: Ramesh Nair, Member (J)
Raju, Member (T)

CX – Appellants are engaged in the activity of purchasing lay flat tubing, converting by slitting small bags and selling the same on payment of duty – They are also purchasing shrink caps which after inspection and packing into bags are sold to the customers on payment of duty – Similarly they are purchasing waste packing bags which are used for packing of the aforesaid product cleared on payment of duty – They are availing credit on lay flat tubing, shrink caps and waste packing bags – case of the Revenue is that the aforesaid activities do not constitute manufacture as envisaged in s 2(f) of the CEA, 1944 and hence, the appellants are not entited for CENVAT Credit – demand confirmed, therefore, assessee in appeal before CESTAT.

Held: Transaction carried out by the appellant is squarely covered under Rule 16 of Central Excise Rules, 2002 – This provision clearly makes it clear that even if the activity does not amount to manufacture, the CENVAT credit is admissible – There is no case of the department that the appellant have paid duty less than the CENVAT Credit – impugned order set aside and appeals allowed: CESTAT [para 4]

Appeals allowed

Case laws cited:

Creative Enterprises- 2008-TIOL-784-HC-AHM-CX… Para 2

Creative Enterprises- 2009 (243) ELT A-120 (SC)… Para 2

Vishal Precision Steel Tubes – 2017-TIOL-613-HC-KAR-CX… Para 2

Ajinkya Enterprises – 2011-TIOL-1333-CESTAT-MUM… Para 2

Ajinkya Enterprises – 2012-TIOL-578-HC-MUM-CX… Para 2

Uttam Galva Steels – 2016-TIOL-437-CESTAT-MUM… Para 2

Tata Steels Ltd – 2017-TIOL-796-CESTAT-MUM… Para 2

FINAL ORDER NOS. A/10359-10361/2019

Per: Ramesh Nair:

The appellants are engaged in the activity of purchasing layflat tubing, converting by slitting small bags and selling the same on payment of duty. They are also purchasing shrink caps which after inspection and packing into bags sold to the customers on payment of duty. Similarly they are purchasing waste packing bags which are used for packing of the aforesaid product cleared on payment of duty. They are availing credit on layflat tubing, shrink caps and waste packing bags. The case of the department is that all the activities carried out by the appellant do not amount to the manufacture. Therefore, they are not entitled for Cenvat Credit on layflat tubing, shrink caps and waste plastic bags. Accordingly, the demand was confirmed.

2. Shri T.C. Nair, Ld. Counsel along with Shri Nitin Mehta, Ld. Advocate appearing on behalf of the appellant submits that even though activity does not amount to manufacture but the processed goods were cleared on payment of duty which is more than the Cenvat credit availed. Once, the duty was paid on the processed goods even though it has not undergone manufacture, the CENVAT Credit is admissible. He also submits that in cases where the activity does not amount to manufacture, the CENVAT Credit on the bought out duty paid goods is permitted under Rule 16 of Central Excise Rules 2002. In support of his submission, he placed reliance on the following judgments:

1. Creative Enterprises- 2009 (235) ELT 785 (Guj.) = 2008-TIOL-784-HC-AHM-CX

2. Creative Enterprises- 2009 (243) ELT A-120 (SC)

3. Vishal Precision Steel Tubes-2017 (349) ELT 686 (Kar) = 2017-TIOL-613-HC-KAR-CX

4. Ajinkya Enterprises- 2013 (288) ELT 247 (T) = 2011-TIOL-1333-CESTAT-MUM

5. Ajinkya Enterprises- 2013 (294) ELT 203 (Bom.) = 2012-TIOL-578-HC-MUM-CX

6. Uttam Galva Steels- 2016 (336) ELT 81 (T) = 2016-TIOL-437-CESTAT-MUM

7. Tata Steels Ltd. 2017 (349) ELT 783 (T) = 2017-TIOL-796-CESTAT-MUM

3. Shri K.J. Kinariwala, Ld. Asst. Commr. (AR) reiterates the findings of the impugned order.

4. On careful consideration of submission made by both the sides and perusal of records we find that there is no dispute of the facts that the appellant have purchased layflat tubing, shrink caps and waste packing bags on payment of Excise duty and certain activities have been carried out after such activities they have cleared the goods on payment of duty. This transaction is squarely covered under Rule 16 of Central Excise Rule 2002 which is reproduced below:

“Rule 16. Credit of duty on goods brought to the factory. –

(1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules.

(2) If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.

Explanation. – The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by the manufacturer who removes the goods.

(3) If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (2), the assessee may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the Commissioner.”

On plain reading of above rule, we observe that an assessee is permitted to bring the bought out goods and avail CENVAT credit on it and after any process can clear on payment of duty. In case the activity amounts to manufacture the assessee is required to pay duty on its transaction value and if the activity does not amount to manufacture, the excise duty so payable should be equal to the CENVAT credit on the bought out goods. This provision clearly makes it clear that even if the activity does not amount to manufacture, the CENVAT credit is admissible the. There is no case of the department that the appellant have paid duty less than the CENVAT Credit. Accordingly, in terms of Rule 16, of Central Excise Rules, 2002 CENVAT credit is admissible. Impugned order is set aside, the appeal is allowed. Since the main appeal of the Company is allowed, other appeals on penalty which is consequential to the demand are also liable to be allowed. Hence all the appeals are allowed.

(Dictated and pronounced in the open Court)

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