2018 (9) TMI 122 - AT - Central Excise

CENVAT Credit - Manufacture or not - waterproofing chemicals and other chemicals - Alleging that the said activity does not amount to manufacture, a show-cause notice was issued proposing denial of CENVAT Credit - Held that - Undisputedly the appellant had discharged appropriate Central Excise duty after undertaking the process of repacking, relabeling of the inputs on which credit has been availed by them. Thus, it is incorrect to allege that the appellants are not eligible to avail CENVAT Credit on inputs that has been utilized in the manufacture (repacking, relabeling etc.) of waterproofing resultant product, on which appropriate excise duty was paid and accepted by the Revenue. Reliance placed in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES 2012 (7) TMI 141 - BOMBAY HIGH COURT , where it was held that Once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity does not amount to manufacture. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against Order-in-Original denying CENVAT Credit on inputs used in manufacturing finished goods.
- Allegation that repacking and relabeling activities do not amount to manufacture.
- Interpretation of principles of law laid down by the Hon'ble Bombay High Court in a relevant case.
- Dispute over eligibility to avail CENVAT Credit on repacked and relabeled inputs.
- Consideration of Circulars by the Board regarding manufacturing activities.
- Application of previous judgments by CESTAT and High Courts in similar cases.
- Decision on whether duty paid on final products should impact the reversal of CENVAT Credit.

Analysis:
The appeal before the Appellate Tribunal CESTAT Mumbai involved a challenge against Order-in-Original No. 44/BR-44/Th-I/2010 passed by the Commissioner of Central Excise, Thane-I. The dispute centered around the denial of CENVAT Credit amounting to ?2,17,77,276 on inputs used in the manufacturing of finished goods during a specified period. The appellant, engaged in manufacturing waterproofing and other chemicals, considered repacking and relabeling as part of the manufacturing process and paid appropriate excise duty on such goods. The Revenue, however, contended that these activities did not constitute manufacture, leading to the issuance of a show-cause notice proposing the denial of CENVAT Credit.

During the proceedings, the appellant argued that their interpretation of repacking and relabeling as manufacturing activities aligns with legal principles established by the Hon'ble Bombay High Court in a specific case. The Tribunal noted that the appellant had paid excise duty after repacking and relabeling the inputs for which they had availed CENVAT Credit. Citing the judgment of the Hon'ble Bombay High Court, the Tribunal emphasized that once duty on final products is accepted by the department, the availed CENVAT Credit need not be reversed even if the activity does not strictly amount to manufacture.

In light of the legal precedents and principles discussed, the Tribunal found no merit in the impugned order denying the CENVAT Credit on inputs used in the manufacturing process. Consequently, the Tribunal set aside the order and allowed the appeal in favor of the appellant. The decision was based on the application of established legal interpretations and previous judgments by higher courts and the CESTAT, ensuring consistency in the treatment of excise duty and CENVAT Credit in similar cases.