2013 (11) TMI 1107 - AT - Central Excise

Activity of Putting Label on goods - Denial of cenvat credit - Polyurethane resin imported and cleared without any processing or manufacture Whether the Process amounts to manufacture or not Held that - Only the activity that is being carried out on these goods is putting a label describing the goods as solvent free adhesives with particular code number - There is no provision under the law, which will lead the said activity to be deemed to be amounting to manufacture - Selling adhesives and solvent together does not amount to manufacture Relying upon CCE, Mumbai-III v. Converter Adhesives & Chemicals (P) Ltd. 2005 (8) TMI 17 - SUPREME COURT OF INDIA - the activity carried out on polyurethane resin would not amount to manufacture. Whole of the credit availed does not appear to be used for clearance of polyurethane resin or adhesive, the lower authority directed to examine how much credit has been utilized for the clearance of polyurethane resin on which credit was availed and demand has to be reduced to that extent Decided in favour of Assessee

Summary

Issues:
Classification of goods for Cenvat credit - Whether labeling activity amounts to manufacture - Utilization of credit for clearance of final product

Analysis:
1. The appellants imported 'polyurethane resin' and 'castor oil,' labeling them as 'solvent free adhesives' and 'solvent free hardener,' respectively, with specific code numbers and their name. The goods were cleared after labeling, and the appellants claimed Cenvat credit. A show cause notice was issued, denying the credit on the grounds of no processing or manufacture.

2. The appellants argued that labeling activities constitute manufacture under Chapter Note (5) to Chapter 15, making them eligible for Cenvat credit. They cited various case laws to support their contention, emphasizing that the credit, once utilized for clearance, cannot be recovered, relying on legal precedents like CCE v. Creative Enterprises and Vickers Systems International Ltd.

3. The Hon'ble Supreme Court's decision in CCE v. Converter Adhesives & Chemicals (P) Ltd. was referenced to support the classification of goods as adhesives under Chapter 35.06. The Commissioner (AR) contended that labeling under Chapter 39 does not amount to manufacture, and selling goods in a set does not permit Cenvat credit.

4. The Tribunal examined the submissions and found that the labeling activity did not amount to manufacture under the law. The goods were sold as such without any transformation, and selling adhesives and hardener together did not constitute manufacture. The Supreme Court decision cited was relevant for product classification, not the manufacturing process.

5. While acknowledging the appellant's argument on credit utilization, the Tribunal directed the lower authority to determine the credit utilized for polyurethane resin clearance and reduce the demand accordingly. The decision highlighted that not the entire credit was used for the resin, necessitating a review of interest and penalty calculations.

6. In conclusion, the Tribunal held that the labeling activity on polyurethane resin did not amount to manufacture, rejecting the appellant's claim for Cenvat credit. The decision emphasized the need for proper utilization assessment and adjustments in the demand, interest, and penalty amounts accordingly.