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2019 (10) TMI 577 - AT - Central ExciseReversal of Cenvat credit - activity of refilling/relabeling of ink containers - Process not amounting to manufacture - appellant imported ink in bulk and procured the container form third parties in open market. The ink was procured and refilled in these containers and labelled and cleared as such - extended period of limitation - HELD THAT - No demand has been raised for printing ink reservoir with sump chip in computation of demand. The imported ink container, the appellant has availed credit of CVD paid by them on the premise that the activity of refilling/relabeling. As per Chapter Note 7 to Chapter 32, the activity undertaken by the appellant does not amount to manufacture. Therefore, the appellant is not entitled to avail credit of CVD paid by them at time of import. Hon ble High Court of Bombay in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES 2012 (7) TMI 141 - BOMBAY HIGH COURT , by upholding the finding of this Tribunal that if the activity does not amount to manufacture and the goods have been cleared on payment of duty, in such case, the duty paid by the assessee which has been accepted by the department and more than the credit availed. In that circumstance, the duty paid by the assessee shall amount to reversal of credit and the assessee is not required to reverse the credit. Admittedly in this case, the appellant cleared the said imported goods after refilling on payment of duty. Therefore, if the activity does not amount to manufacture, in that case, the duty paid by the appellant shall amount to reversal of credit. Therefore, the appellant is not required to reverse the credit of CVD availed by the appellant at the time of import - Demand set aside - penalty also set aside. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the process of refilling and relabeling of ink containers amounts to manufacture and is liable for excise duty. 2. Whether the appellant is entitled to avail CENVAT credit of CVD on imported printing ink make-up cartridges and wash solutions. Detailed Analysis: 1. Whether the process of refilling and relabeling of ink containers amounts to manufacture and is liable for excise duty: The appellant is engaged in various activities including refilling, relabeling, and manufacturing of printing inks and related products. The primary issue is whether these activities constitute "manufacture" under the Central Excise Act, 1944. The Tribunal examined the nature of the activities undertaken by the appellant, including refilling ink from bulk drums into smaller containers and relabeling these containers. The Tribunal referred to Section 2(f) of the Central Excise Act, 1944, which defines "manufacture" and includes processes incidental or ancillary to the completion of a manufactured product. The Tribunal analyzed the Supreme Court's rulings in cases like Delhi Cloth and General Mills Ltd. and S.R. Tissues Pvt. Ltd., which clarified that mere changes in form or packaging do not amount to manufacture unless a new and distinct product emerges. In this case, the Tribunal found that the appellant procured empty containers, filled them with ink, and relabeled them without altering the essential character of the ink. The ink remained classified under heading 3215 before and after the refilling and relabeling process. The Tribunal concluded that no new product with a different name, character, or use emerged from these activities, and thus, they did not amount to manufacture. The Tribunal also noted that the Commissioner had erroneously classified the products under subheading 8443 30 10 as parts and accessories of goods of heading 8443 39, without proper analysis of whether the activities constituted manufacture. The Tribunal emphasized that classification under a specific heading does not automatically imply that the activity amounts to manufacture. Furthermore, the Tribunal highlighted that there is no deeming provision in the Central Excise Tariff Act that considers refilling and relabeling as manufacture for the goods in question. Chapter Note 7 to Chapter 32, which deems certain activities as manufacture, does not apply to the headings relevant to the appellant's products. Therefore, the Tribunal held that the activities of refilling and relabeling undertaken by the appellant do not amount to manufacture, and consequently, no excise duty is leviable on these activities. 2. Whether the appellant is entitled to avail CENVAT credit of CVD on imported printing ink make-up cartridges and wash solutions: The appellant had availed CENVAT credit of CVD paid on imported printing ink make-up cartridges and wash solutions, assuming that the activities of refilling and relabeling amounted to manufacture. However, since the Tribunal concluded that these activities do not constitute manufacture, the question arose whether the appellant could still avail the CENVAT credit. The Tribunal referred to the decision of the Hon'ble High Court of Bombay in the case of Ajinkya Enterprises, which held that if an activity does not amount to manufacture but the goods are cleared on payment of duty, the duty paid by the assessee is considered as reversal of credit. In such cases, the assessee is not required to reverse the credit availed. Applying this principle, the Tribunal noted that the appellant had cleared the imported goods after refilling and relabeling on payment of duty. Therefore, even though the activities did not amount to manufacture, the duty paid by the appellant would be treated as reversal of credit. Consequently, the appellant is not required to reverse the CENVAT credit of CVD availed at the time of import. Conclusion: The Tribunal set aside the impugned order and allowed the appeals filed by the appellant. It was held that the activities of refilling and relabeling do not amount to manufacture, and no excise duty is leviable on these activities. Additionally, the appellant is not required to reverse the CENVAT credit of CVD availed on the imported goods. The demands and penalties imposed on the appellant were found to be unsustainable and were accordingly set aside.
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