2022 (8) TMI 982 - AT - Central Excise

Reversal of CENVAT Credit - empty drums and barrels - reversal of credit in terms of Rule 6 of Cenvat Credit Rules, 2004 - HELD THAT - The issue is settled by the decision of tribunal in the case of CADILA HEALTHCARE LTD. 2022 (6) TMI 1177 - CESTAT AHMEDABAD , where it was held that In the present case, the packaging material since not arising out of any manufacturing process the same will not fall either under Sub-clause (d) or sub-clause (h) of Rule 2 of Cenvat Credit Rules, 2004. As regard explanation (2), it is only for the purpose of value of the non-excisable goods to calculate the payable amount under Rule 6(3). Since the goods does not fall under the explanation (1), explanation (2) will obviously not be applicable therefore, the charges made in the Show Cause Notice are not tenable. The appeal is allowed.

Summary

Issues:
Appeal against the demand for reversal of Cenvat Credit on empty drums and barrels cleared by the appellant.

Analysis:
The appellant, Bodal Chemicals Ltd., filed an appeal against the order demanding the reversal of Cenvat Credit on empty drums and barrels cleared by them. The appellant's counsel argued that they bring raw material in barrels and drums, and after using the material, the empty drums and barrels are sold from their premises. The revenue sought reversal of Cenvat credit under Rule 6 of Cenvat Credit Rules, 2004. The counsel pointed out that a similar issue was decided in the case of CADILA HEALTHCARE LTD by the Tribunal. The Authorized Representative (AR) reiterated the findings of the impugned order.

The Hon'ble Member (Technical), Mr. Raju, considered the submissions and referred to the decision in the case of CADILA HEALTHCARE LTD. The Tribunal in that case observed that the demand was confirmed based on the ground that empty drums of cenvatable input are non-excisable goods, attracting a 6% reversal under Rule 6(3) of Cenvat Credit Rules, 2004. The Tribunal also referred to a similar case involving Banco Gasket I Ltd, where it was highlighted that the packaging material, being empty, did not arise from the manufacturing process of any final product. The Tribunal analyzed Explanation (1) & (2) of Rule 6(1) of Cenvat Credit Rules and concluded that only goods arising from manufacturing activity could be considered for the purpose of demand under Rule 6(3). Since the packaging material did not arise from any manufacturing process, it did not fall under the definitions of "exempted goods" or "final products" under Rule 2 of Cenvat Credit Rules, 2004. Therefore, the charges in the Show Cause Notice were deemed not tenable.

Based on the precedents and legal analysis, the appeal was allowed, relying on the decision in the case of CADILA HEALTHCARE LTD. The judgment was dictated and pronounced in open court by the Hon'ble Member (Technical), Mr. Raju.