2010 (11) TMI 902 - AT - Central Excise

Summary

Issues:
Appeal against order of Commissioner (Appeals) regarding duty and penalty on returned supari for re-processing, demand of duty on packing materials, bifurcation of goods under Rule 16, irregular utilization of credit on laminated films.

Analysis:
The case involves an appeal filed by a company against the order of the Commissioner (Appeals) regarding duty and penalty related to returned supari for re-processing. The company, a manufacturer of Pan Masala and scented supari, availed credit on duty paid laminated films used for making pouches to pack final products. The dispute arose when some supari cleared by the company was returned for re-processing, leading to a demand for duty payment on the packing materials. The original authority confirmed the demand and imposed a penalty, which was later reduced by the Commissioner (Appeals). The company challenged the duty and penalty, while the department sought an enhancement of the penalty.

The company argued that the duty paid on laminated films was rightfully utilized for making pouches used for packing supari. They contended that at the time of clearance, supari's value included the packing material, and the pouches were not considered a separate product. The company received returned supari for re-processing, and after processing, cleared it by paying the applicable duty as supari. The company opposed the bifurcation of received goods into supari and pouches, stating that demanding duty on quantities in pouches was unwarranted.

After considering submissions, the Tribunal found that the identity of packing material was lost when supari was cleared, and viewing the cleared goods as separate supari and pouches was legally unsound. The Tribunal rejected the department's proposal to demand duty under Rule 14 of Cenvat Credit Rules, stating there was no irregular utilization of credit. It deemed the demand for duty unjustified and allowed the company's appeal. Consequently, the issue of enhancing the penalty did not arise. The Tribunal did not address the limitation issue raised by the company.

In conclusion, the Tribunal allowed the company's appeal, providing consequential relief, and rejected the department's appeal. The judgment emphasized the integration of packing material into the final product at clearance, dismissing the notion of separate supari and pouches for duty calculation purposes.