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2001 (9) TMI 602 - AT - Central Excise
Issues:
1. Availability of Cenvat credit of duty paid on tea brought from outside for blending. 2. Determination of whether blending of bought out tea with own manufactured tea amounts to manufacture. 3. Interpretation of relevant CENVAT Rules regarding classification and assessment of tea for central excise purposes. 4. Impact of the omission of Chapter Note 2 of Chapter 9 of Central Excise Tariff on the process of blending teas. 5. Entitlement of the appellant to Cenvat credit on duty paid on bought out tea. Analysis: 1. The primary issue in this case pertains to the availability of Cenvat credit of duty paid on tea brought from outside for blending purposes. The appellant, engaged in manufacturing tea, sought to utilize the Cenvat credit for payment of duty on their finally cleared tea. The Commissioner, in the impugned order, disallowed the Cenvat credit, contending that blending of bought out tea with the appellant's own manufactured tea does not constitute manufacture as per Section 2(f) provisions. The appellant argued that the blended tea, cleared after blending, should be considered the final product, entitling them to Cenvat credit on the bought out tea. 2. The Commissioner's order highlighted that the appellant referred to the bought out tea as "flavoured tea" and their own manufactured tea as "liquor tea." The Commissioner emphasized that for central excise purposes, all manufactured teas fall under the same classification without distinction based on terms like "flavoured" or "liquor" tea. The Commissioner reasoned that the appellant's justification of the bought out tea as an input for manufacturing bulk tea was incorrect, as the blending process did not amount to manufacture post the amendment omitting Chapter Note 2 of Chapter 9 of Central Excise Tariff. 3. The Commissioner further elaborated that the Finance Bill of 1999 simplified the duty levy on tea, specifically imposing a duty of Rs. 2 per kg on bulk tea, exempting other teas. The Commissioner concluded that the blending of teas no longer constituted manufacture post the amendment, thereby precluding the appellant from claiming Cenvat credit on the bought out tea. The Commissioner emphasized that black tea was used solely for blending purposes and not directly or indirectly for manufacturing bulk tea, thereby disallowing the Cenvat credit facility for such activities. 4. Upon thorough examination of the case, the Appellate Tribunal noted that the bought out tea, termed as "flavoured tea," was duty paid and blended with the appellant's own manufactured "liquor tea." The Tribunal observed that the final product cleared by the appellant was the blended tea, comprising inputs from both the appellant's manufactured tea and the bought out tea. Consequently, the Tribunal held that the appellant was entitled to the Cenvat credit of duty paid on the bought out tea, as there was no revenue loss due to the credit utilization and duty payment on the entire blended tea quantity. 5. In conclusion, the Appellate Tribunal allowed the appeal, granting the appellant the benefit of Cenvat credit on the bought out tea used for blending, as the final product cleared by the appellant was the blended tea. The Tribunal's decision aligned with the view that the appellant's utilization of the credit and payment of duty on the blended tea did not result in any revenue loss, affirming the appellant's entitlement to the Cenvat credit as per the applicable provisions.
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