2018 (1) TMI 1435 - AT - Central Excise

CENVAT Credit - imported input sold as such - re-packing/re-labelling of imported goods is done - whether this can be considered as manufacturing activity undertaken or removal of inputs as such? - violation of import conditions - time limitation - Held that - The re-packing/re-labelling activity which was carried out by the appellant alone will not amount to manufacture but along with re-packing/re-labelling there should be an activity i.e. conversion from bulk pack to retail pack to render the product as manufactured goods - The appellant s activity being only re-packing/re-labelling of imported goods does not amount to manufacture, therefore, the clearance of such goods shall be correctly treated as removal of input as such - In this position the appellant was required to pay the duty equal to the cenvat credit availed on such inputs, whereas, the appellant have paid lesser duty on transaction value treating the re-packing/re-labelling as manufacture activity - the demand on merit is correct. Time limitation - Held that - When the department itself was of the view that the activity of re-packing/re-labelling alone is amount to manufacture. The same bonafide belief was entertained by the appellant which cannot be construed as malafide intention to evade the payment of duty, therefore, the demand for the extended period cannot be raised. In the present case, demand of the period 2006-07 to 2007-08 was raised by SCN dated 16.02.2009, therefore, the entire demand is under extended period, hence the same will not sustain on the ground of limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Chapter Note of Chapter 29 regarding re-packing and re-labelling as manufacture.
2. Whether the demand raised invoking extended period is time-barred.

Analysis:

Issue 1: Interpretation of Chapter Note of Chapter 29 regarding re-packing and re-labelling as manufacture:
The case involved the appellant engaged in the manufacture of excisable goods who availed cenvat credit on imported goods, "Sulfolane Anhydrus," which were cleared without undergoing any process. The department demanded reversal of cenvat credit due to the duty paid being less than the credit availed. The appellant contended that re-packing and re-labelling did not amount to manufacture as per Chapter Note 10 of Chapter 29. The Tribunal held that re-packing/re-labelling alone does not constitute manufacture unless there is a conversion from bulk to retail packs to make the product marketable. Citing the precedent of M/s Amritlal Chemaux Ltd, the Tribunal concluded that the appellant's activity of re-packing/re-labelling did not amount to manufacture, and the duty paid was insufficient. However, the demand was upheld based on the merit of the case.

Issue 2: Whether the demand raised invoking extended period is time-barred:
The appellant argued that the demand was time-barred, invoking the limitation clause. The Tribunal considered the appellant's contention, noting that the issue of re-packing/re-labelling as manufacture had been a subject of dispute until it was settled by the Supreme Court in previous cases. The Tribunal found that both the appellant and the department had previously held the belief that such activities amounted to manufacture. Therefore, the Tribunal held that the appellant's belief was bona fide and not an attempt to evade duty. As the demand was raised for the period 2006-07 to 2007-08 under the extended period, the Tribunal ruled in favor of the appellant on the grounds of limitation, setting aside the impugned order solely based on this aspect.

In conclusion, the Tribunal allowed the appeal on the grounds of limitation, finding the demand for the extended period unsustainable. The judgment highlighted the interpretation of Chapter Note 10 of Chapter 29 regarding re-packing and re-labelling activities and emphasized the importance of bona fide belief in determining liability for duty payment.