2013 (11) TMI 781 - AT - Central Excise

Clearance of duty paid imported goods as such - Reversal of cenvat credit as per Rule 3(5) of cenvat credit rules - Held that - There is no chapter note under Chapter 39 of the Central Excise Tariff to show that repacking amounts to manufacture - The applicants while clearing polymer as such, reclassified the same under Chapter 38 of the Central Excise Tariff - as the applicants are clearing the imported duty paid polymer on which credit has been availed as such, therefore the applicants are liable to reverse the credit availed in respect of polymer. Activity Manufacture or not as per section 2(f) of the central excise act - The applicants never disclosed to the Revenue regarding their activity that they are clearing polymer as such rather the applicants have shown in their declaration as chemical additives - The applicants are receiving polymer in metal crates and the polymer is debulked from metal crates into bags and the polymer bags are cleaned, repacked and relabeled - the activity cannot be considered as amounting to manufacture as per the provisions of Section 2(f) of the Central Excise Act. Waiver of Pre-deposit - The applicants have not made out a prima facie case for total waiver of duty - The applicants are directed to deposit an amount equal to 50% of the duty as pre-deposit upon such submission rest of the duty to be waived till the disposal half of the amount granted to be stayed.

Summary

Issues:
- Waiver of pre-deposit of duty, interest, and penalties
- Time-barred demand and suppression of facts
- Classification of imported polymer under different tariff chapters
- Activity of repacking and reclassification as manufacture
- Financial hardship plea for total waiver of duty

Analysis:
The applicants sought waiver of pre-deposit of duty, interest, and penalties amounting to Rs.1,16,95,872. They are engaged in manufacturing lubricants and chemical additives using polymer as raw material. The issue arose when duty paid imported polymer was cleared after reworking and repacking, leading to a demand for reversing the credit availed under Rule 3(5) of the Cenvat Credit Rules. The applicants argued that the demand was time-barred, as the period in question was from February 2007 to October 2011, and they had been regularly filing returns showing credit and duty payments, refuting any intent to evade payment.

The Revenue contended that the applicants reclassified the imported polymer under a different tariff chapter after repacking to take advantage of a provision that deemed such activities as manufacturing. It was alleged that the applicants did not disclose the true nature of clearing the imported polymer as such, instead declaring it as chemical additives, thereby suppressing crucial information from the Revenue. However, the Tribunal found that the activity of repacking and reclassifying the polymer did not amount to manufacture under the Central Excise Act.

Regarding the plea of financial hardship for total waiver of duty, the Tribunal noted that the applicants failed to establish a strong case for complete waiver. Consequently, they were directed to deposit 50% of the confirmed duty within eight weeks, with the remaining amount, along with interest and penalties, being waived upon this initial deposit. Recovery of the waived amount was stayed pending the appeals process. The decision was to be complied with by a specified date.

In conclusion, the Tribunal upheld the demand for reversing the credit availed on imported polymer, rejected the plea for total waiver of duty based on financial hardship, and ordered a partial pre-deposit of the confirmed duty amount.