2009 (1) TMI 639 - AT - Central Excise

Cenvat/Modvat - Loan licensee - the value of the clearance on behalf of the loan licensee has not been taken into account - Held that - the appellants have to be held as manufacturer and hence are eligible for capital goods Cenvat credit.

Summary

Issues:
1. Availing SSI Exemption and Cenvat credit utilization.
2. Eligibility to utilize Cenvat credit for payment of duty on goods manufactured for loan licensee.
3. Interpretation of manufacturer in Central Excise legal requirements.
4. Application of notification No. 08/2003 in determining duty liability.
5. Rejection of Revenue's appeal based on manufacturer status and duty payment.

Issue 1: Availing SSI Exemption and Cenvat credit utilization

The case involved M/s. Preet Pharma Pvt. Ltd. availing SSI Exemption on PP Medicines manufactured on their own account and paying duty at full rate on goods manufactured for a loan licensee. The respondents utilized Cenvat credit of Rs. 44,490 on capital goods for paying Central Excise duties on goods manufactured for the loan licensee. The Revenue appealed against the Commissioner (Appeals) order allowing this credit utilization.

Issue 2: Eligibility to utilize Cenvat credit for payment of duty on goods manufactured for loan licensee

The Revenue contended that the duty paid on capital goods was utilized by a manufacturer other than the owner of the capital goods, as the loan licensee should be treated as the manufacturer for goods cleared on their behalf. The Commissioner (Appeals) allowed the credit, suggesting that the respondents could use it later when paying duty on their own goods, making the process revenue neutral.

Issue 3: Interpretation of manufacturer in Central Excise legal requirements

The Tribunal analyzed the legal requirements of Central Excise, considering the respondents as manufacturers due to fulfilling formalities, including duty payment. The concept of a loan licensee in the case of PP Medicines was linked to legal requirements like the Drug Control Act, not Central Excise law. The Tribunal emphasized that the manufacturer is the one who converts raw material into finished products, not the one who gets it done, thus confirming the respondents' eligibility for Cenvat credit.

Issue 4: Application of notification No. 08/2003 in determining duty liability

Notification No. 08/2003 was crucial in determining duty liability, especially when the product is PP medicines and the goods are branded for the loan licensee. The duty payment was attributed to the branding of goods, not because the manufacturer was the loan licensee. The Tribunal clarified that duty becomes payable due to branding, making the appellants eligible for capital goods Cenvat credit.

Issue 5: Rejection of Revenue's appeal based on manufacturer status and duty payment

The Tribunal dismissed the Revenue's appeal, stating that the respondents had to be considered manufacturers under Central Excise law, making them eligible for Cenvat credit on capital goods. The appeal lacked merit based on the manufacturer's status and duty payment criteria, as pronounced by the Tribunal on 13th Jan. 2009.