2004 (6) TMI 66 - AT - Central Excise

Summary

Issues:
Manufacture of medicaments falling under Chapter 30 of the Central Excise Tariff Act, 1995; Affixing M.R.P. on medicaments; Cenvat credit entitlement; Duty payment on goods brought back to the factory; Whether affixing labels amounts to manufacture.

Manufacture of Medicaments:
The appellants are engaged in the manufacture of medicaments falling under Chapter 30 of the Central Excise Tariff Act, 1995. The medicaments are cleared on payment of duty. The issue arose when the M.R.P. on the medicaments needed to be altered after the goods were cleared, leading to the goods being brought back to the factory for label changes. The question was whether this activity amounts to manufacture as per the provisions of Rule 16(4) of Central Excise Rules, 2002.

Affixing M.R.P. on Medicaments:
The appellants were availing the credit of duty paid on the medicaments at the time of original clearance of the goods. The dispute arose when the values were altered, leading to extra duty payment or lower duty payment during the second removal from the factory. The Revenue contended that affixing stickers or labels showing the M.R.P. on the medicaments does not amount to manufacture. Proceedings were initiated, and demands were confirmed against the appellants based on this objection.

Cenvat Credit Entitlement and Duty Payment:
As per Rule 16(4) of Central Excise Rules, 2002, when duty paid goods are brought back to the factory for various reasons, the assessee is entitled to take Cenvat credit of the duty paid. The duty liability arises based on whether the process the goods undergo amounts to manufacture or not. The appellants were paying duty based on the altered values of the medicaments during the second removal from the factory.

Affixing Labels Amounting to Manufacture:
The appellants contested the Revenue's objection by referring to Chapter Note 5 to Chapter 30, which states that labeling or re-labeling of goods amounts to manufacture. They also cited a Board's Circular stating that putting stickers on the outer packing of medicaments to make the product marketable constitutes manufacture. The Tribunal agreed with the appellants' argument, emphasizing that affixing labels on the medicaments is essential for marketing and thus amounts to manufacture. The impugned order was set aside, and the appeal was allowed in favor of the appellants.