2018 (11) TMI 490 - AT - Central Excise

Recovery of CENVAT Credit availed - inputs - speciality polymers - on completion of re-packing and re-labelling, the said speciality polymers were cleared on payment of appropriate duties undisputedly more than the duty borne on procurement, by debit of CENVAT credit account - Held that - It is seen from the records that there is no dispute on the duty liability discharged on the procurement of speciality polymers and even if such procured inputs, capable of being utilised in manufacturing process, were to be cleared as such, the law mandates reversal of CENVAT credit availed at the time of receipt; the discharge of duty liability on the value-added clearance of speciality polymers is not of lesser amount. The debits in the CENVAT credit account has, undisputedly, been recorded at the time of the removal of speciality polymers. - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of CENVAT credit on 'speciality polymers' re-packed and re-labelled before clearance.

Analysis:
1. Issue of CENVAT Credit Denial: The appellant, M/s Akzo Nobel India Ltd, appealed against the denial of CENVAT credit amounting to &8377;1,74,42,635 availed on duties of central excise paid on the procurement of 'speciality polymers' that were re-packed and re-labelled before clearance on payment of appropriate duties of central excise totaling &8377;2,31,44,585 between 2004-05 and 2008-09. The Commissioner of Central Excise imposed a penalty of the same amount, which the appellant sought to set aside.

2. Contentions and Findings: The appellant considered the 'speciality polymers' as 'inputs' under the CENVAT Credit Rules, 2004, and availed credit on the duties. After re-packing and re-labelling, the polymers were cleared on payment of appropriate duties exceeding the duty borne on procurement, debiting the CENVAT credit account. The impugned order directed recovery of the credit, citing the process as ineligible due to not resulting in manufactured goods and the 'inputs' not being received in the production factory.

3. Legal Interpretation: The Tribunal refrained from determining whether re-packing and re-labelling constituted manufacturing. However, it emphasized that if procured inputs, capable of being used in the manufacturing process, were cleared as such, the law mandates reversal of availed CENVAT credit at the time of receipt. The duty liability on the value-added clearance should not be less than the procurement duty. The records confirmed the debits in the CENVAT credit account during the removal of 'speciality polymers.'

4. Precedent and Decision: The Tribunal referred to the case of Ajinkya Enterprises v. Commissioner of Central Excise, Pune-III, which highlighted that if an activity does not amount to manufacture, duty equal to the credit taken on input clearance must be paid. In this case, the duty paid exceeded the credit availed, aligning with various judicial pronouncements. Following these precedents, the Tribunal concluded that the appellant was not required to reverse the credit, rendering the demand in the impugned order unsustainable. Consequently, the penalty imposition was also deemed unsuccessful.

5. Final Decision: The Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant. The judgment was pronounced in court on 06/11/2018.