2015 (2) TMI 465 - AT - Central Excise

Waiver of pre deposit - CENVAT Credit - manufacturing activity or not - whether the activity of inspection, labelling, affixing of stickers or re-labelling amounts to manufacture or not and whether the applicant is eligible to avail CENVAT credit. - Held that - after receiving the imported goods in the warehouse, the applicant undertook the activity of inspection, quality check and repacked it. While repacking, the applicant affixed sticker Marketed by and also affixed the tape having the markings of HONDA. Similarly, when the goods were imported in any of the warehouse situated at Mumbai, Kolkata, Greater Noida and Bhiwadi, and in that case Imported and Packed by sticker was affixed by respective warehouse and the goods were transferred on stock transfer basis to Chennai from where it was marketed by affixing sticker/labeling. On plain reading of clause (iii) of Section 2(f) of the said Act, it is clear that manufacture would include packing / repacking of such goods in unit container or labeling / re-labelling of containers including the declaration or alteration of retail sale price on it for rendering the product marketable to the consumer. With effect from 1.3.2003, the definition of manufacture under Section 2(f) has wide amplification. Note 5 of Chapter 30 insofar as prior to amendment on 1.3.2003, it would be repacking from bulk packs to retail packs . But after the amendment, it includes packing or repacking of such goods in a unit container . In other words, it includes any repacking in unit container. - prima facie, we find there is inspection, repacking and relabeling of the container from unit to unit container or bulk to unit container. Thus, there is repacking of such goods in container and covered within the definition of manufacture under Section 2(f) of the Act, 1944. - applicant has made out a strong prima facie case for waiver of predeposit of entire dues. Accordingly, predeposit of duty along with interest and penalties are waived and recovery thereof stayed during the pendency of the appeals. - Stay granted.

Summary

Issues:
- Whether the activity of inspection, labeling, affixing of stickers, or re-labeling amounts to manufacture?
- Whether the applicant is eligible to avail CENVAT credit?

Analysis:
1. Facts of the Case: The applicants are registered as Deemed Manufacturers of spare parts under Chapter Heading 8708 of the Central Excise Tariff Act, 1985. They procure inputs from various sources and undertake activities like packing, repacking, labeling, and inspection. Show-cause notices were issued proposing to deny CENVAT credit for certain periods and demanding substantial amounts.

2. Applicant's Argument: The counsel for the applicant argued that the processes undertaken fall within the definition of manufacture as per Section 2(f) of the Central Excise Act, 1944, post-amendment in 2003. They contended that the CENVAT credit was rightfully availed and there is no basis for denial.

3. Revenue's Argument: The Authorized Representative for Revenue supported the adjudicating authority's findings, citing precedent cases. They emphasized that the goods were already in a marketable condition, and mere affixing of brands does not constitute relabeling for further marketability.

4. Judgment: The Tribunal analyzed the definition of manufacture under Section 2(f) of the Act, particularly focusing on the amendment effective from 1.3.2003. It noted that the applicant's activities of inspection, repacking, and labeling met the criteria of manufacture as per the amended definition.

5. Precedent and Interpretation: The Tribunal highlighted the significance of the post-amendment definition, emphasizing the inclusion of repacking in a unit container as part of the manufacturing process. It differentiated the pre and post-amendment scenarios to establish the applicant's eligibility for CENVAT credit.

6. Decision and Predeposit Waiver: After thorough consideration, the Tribunal found a strong prima facie case in favor of the applicant. It granted a waiver of predeposit of duty, interest, and penalties, staying the recovery during the appeal's pendency. The Tribunal also directed the listing of all related appeals for a consolidated hearing.

7. Conclusion: The judgment clarified the interpretation of the manufacturing process post-amendment, affirming the applicant's entitlement to CENVAT credit based on the activities conducted. The decision favored the applicant, granting relief from predeposit obligations and ensuring a consolidated hearing for related appeals.