2007 (4) TMI 83 - AT - Central Excise

Cenvat/Modvat - Department contended that appellant activity of packing of photographic film from smaller to larger pack is manufacturing activity and accordingly demand and penalty imposed - Held that department contention was correct and demand and penalty sustained

Summary

Issues:
1. Whether the activity of packing and repacking 'unexposed photographic films' into cartons constitutes manufacture under Section 2(f)(iii) of the Central Excise Act.
2. Whether the appellants are entitled to Cenvat credit of countervailing duty (CVD) paid on imported input for payment of duty on the subject goods.
3. Whether waiver of predeposit and stay of recovery should be granted in respect of the duty and penalty amounts.

Analysis:

Issue 1:
The impugned order demanded over Rs. 20 crores towards duty of excise and Education Cess from the appellants for the period March, 2003 to February, 2006, concerning 'unexposed photographic films' marketed in pre-printed cartons. The department alleged a manufacturing activity under Section 2(f)(iii) of the Central Excise Act due to packing and repacking activities. The appellants contended that the activity was trading, not manufacturing, as it did not involve significant alterations. They cited legal precedents where similar activities were not considered manufacturing. The Tribunal found merit in the appellants' argument and granted waiver of predeposit and stay of recovery considering the available Cenvat credit and interests of the Revenue.

Issue 2:
The appellants claimed entitlement to Cenvat credit of CVD paid on imported input for payment of duty on the subject goods. The learned SDR opposed this claim, arguing that the CVD was paid through DEPB scripts, thus not eligible for credit. However, after examining the relevant Foreign Trade Policy provisions, it was established that Cenvat credit of CVD paid on imported input was available to the appellants during the period in question. This credit, along with the duty paid on packing material, could offset the demanded duty on the subject goods, justifying the waiver of predeposit and stay of recovery.

Issue 3:
Considering the substantial amount involved in the case, the Tribunal accepted the suggestion for early disposal of the appeal. The appeal was scheduled for a prompt hearing to address the complexities and implications of the issues raised. The decision to grant waiver of predeposit and stay of recovery was made in light of the legal provisions and the interests of all parties involved, ensuring a fair and just resolution of the matter.

This detailed analysis of the judgment highlights the key legal arguments, precedents cited, and the Tribunal's rationale in addressing the issues raised by the appellants and the Revenue.