2018 (7) TMI 1709 - AT - Central Excise

Manufacture - the appellant put the imported goods into plastic bins and putting label on the plastic bins showing the description, part number and quantity etc., and clearing to the same to OEM - whether the activity amounts to manufacture? - Time limitation - Held that - In this case if it is held that activity undertaken by the assessee as the manufacture then assessee is entitled to avail Cenvat credit of ₹ 26.11 crores whereas duty payable by the assessee is only ₹ 20,77,60,576/- which is much less than the Cenvat credit available to the assessee - no mala fides are attributable to the assessee - also, it is a Revenue neutral situation. Admittedly, the show cause notice has been issued by invoking the extended period of limitation as show cause notice has been issued on 30/05/2011 for the period June, 2006 to December, 2009. In that circumstances, the demand is barred by limitation. Appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against impugned order - Whether activity of putting label and packing goods amounts to manufacture - Liability to pay duty - Validity of penalty imposed - Invocation of extended period of limitation.

Analysis:
The case involved an appeal against an impugned order where the assessee, engaged in manufacturing automobile parts and importing certain parts for sale to OEMs, was alleged by the Revenue to have engaged in manufacturing by putting labels on imported goods and packing them in plastic bins. The Revenue demanded duty, interest, and imposed a penalty of ?1 crore under Rule 25 of Central Excise Rules, 2002. The assessee contended that the activity did not amount to manufacture as per Section 2(f)(iii) of the Central Excise Act, 1944. Alternatively, if considered as manufacture, they argued for Cenvat credit exceeding the duty liability, implying no mala fides. The Revenue argued that the packing activity constituted manufacture and invoked the extended period of limitation due to lack of departmental knowledge.

Upon hearing the arguments, the Tribunal noted that if the activity was deemed as manufacture, the assessee could avail Cenvat credit exceeding the duty liability. Consequently, the Tribunal found no mala fides on the part of the assessee and held that the demand was time-barred as the show cause notice was issued beyond the limitation period. Citing a precedent in United Distributors vs. Commissioner of Central Excise, the Tribunal emphasized that a situation where Cenvat credit surpasses duty liability results in a revenue-neutral scenario, absolving the assessee from duty payment. Therefore, the impugned order was set aside.

In conclusion, the Tribunal allowed the appeal filed by the assessee, dismissing the Revenue's appeal. The assessee was granted any consequential relief, if applicable, in light of the judgment.