2018 (4) TMI 1310 - AT - Central Excise

Manufacture - demand was confirmed invoking Rule 6(3)(i) Cenvat Credit Rules,2004 on the ground that appellant s activity of repacking and re-labeling does not amount to manufacture therefore activity amount to trading only - Rule 6(3) (i) of CCR - Held that - it is undisputed fact that appellant even though the activity does not amount to manufacture but cleared re-packed goods on payment of duty, which is more than the amount payable under Rule 6(3)(i), once the goods have been cleared on payment of duty, Rule 6(3)(i) cannot be applied - demand under Rule 6(3)(i) is not sustainable. Refund claim - case of appellant is that once it was held by the Revenue that activity of repacking and re-labelling does not amount to manufacture, all the duty paid on such repacked goods become refundable - Rule 16 of Central Excise Rules, 2002 - Held that - Additional Commissioner while disposing of SCN proposing denial of Cenvat credit clearly held that demand is not sustainable on the ground that appellant have cleared the repacked goods on payment of duty - when the appellant have availed the Cenvat credit and paid excise duty even though the activity does not amount to manufacture, amount of excise duty paid by them cannot be refundable. The appellant s activity of taking Cenvat credit on the duty paid goods received in the factory and re-issue of the said goods after re-packing and re-labelling on payment of duty is squarely covered under the provision of Rule 16 of CER 2002. Therefore there is no question of any refund of any amount paid while clearing re-packed goods. Appeal allowed in part.

Summary

Issues:
1. Interpretation of Rule 6(3)(i) of Cenvat Credit Rules, 2004 regarding repacking and re-labeling activities.
2. Claim of refund based on the nature of manufacturing activity and excise duty payments.

Analysis:

Issue 1: Interpretation of Rule 6(3)(i) of Cenvat Credit Rules, 2004 regarding repacking and re-labeling activities:

The case involved the appellant engaged in repacking and re-labeling of 'Solvent C-9' and paying excise duty by availing Cenvat credit. The dispute arose when a show cause notice was issued demanding payment under Rule 6(3)(i) of Cenvat Credit Rules, 2004, claiming the activity was trading and not manufacturing. The Order-in-Original confirmed the demand, which was upheld by the Commissioner (Appeals). However, the Appellate Tribunal found that even though the activity did not amount to manufacturing, the goods were cleared with duty paid, rendering the demand under Rule 6(3)(i) unsustainable. The impugned order was set aside in favor of the appellant.

Issue 2: Claim of refund based on the nature of manufacturing activity and excise duty payments:

Regarding the second appeal, the appellant sought a refund based on the Revenue's determination that the repacking activity did not constitute manufacturing. The Additional Commissioner had previously held that the demand for Cenvat credit was not sustainable as the goods were cleared with duty paid. The Appellate Tribunal referred to Rule 16 of Central Excise Rules, 2002, emphasizing that the appellant was entitled to Cenvat credit on duty-paid goods even if not manufactured, and duty was to be paid upon re-issue. Therefore, the Tribunal ruled that the appellant was not entitled to the refund claimed, upholding the Order-in-Appeal. Consequently, the first appeal was allowed, and the second appeal for refund was dismissed, with the cross objection disposed of accordingly.

In conclusion, the Appellate Tribunal's judgment clarified the application of Cenvat credit rules in the context of repacking and re-labeling activities, emphasizing the significance of duty payments upon clearance of goods, and upheld the decisions based on the specific legal provisions and activities undertaken by the appellant.