2013 (11) TMI 1127 - AT - Central Excise

Activity Deemed Manufacture u/s 2(f) of Central Excise Act Asseessee undertook the activity of packing / re-packing / labeling / re-labelling / affixing of MRP labels on the clutches Waiver of Pre-deposit Held that - The applicant is a deemed manufacturer under Section 2(f) of the Central Excise Act - the applicant reversed the credit on the goods cleared as such - In terms of Rule 3(5) of CENVAT Credit Rules, 2004, and the applicant may clear the goods as such after reversing the credit - Rule 3(5) provides that when the inputs or capital goods on which CENVAT credit has been taken, are reversed as such from the factory, the manufacturer shall pay on amount equal to the credit availed in respect of such credit - There is no finding and the Commissioner has not considered properly - the applicant has made out a prima facie case for waiver of entire amount of duty along with interest and penalty Thus Pre-deposit of duty along with interest and penalty are waived till the disposal stay granted.

Summary

Issues:
1. Whether the activity of packing, labeling, and affixing MRP labels on clutches amounts to deemed manufacture under Section 2(f) of the Central Excise Act?
2. Whether the denial of credit of Rs.11,54,59,277/- along with interest and penalty by the Commissioner is justified?
3. Whether the applicant is eligible to avail credit on finished goods without undertaking any process?
4. Whether the applicant made a prima facie case for waiver of duty, interest, and penalty during the pendency of the appeal?

Issue 1:
The Tribunal found that the activity of packing, re-packing, labeling, re-labeling, and affixing MRP labels on clutches received from the applicant's Unit I and vendors amounts to deemed manufacture under Section 2(f) of the Central Excise Act. The Commissioner observed that the applicant received finished clutch assemblies, availed credit, and cleared them from their premises, leading to the denial of credit of Rs.11,54,59,277/- along with interest and penalty.

Issue 2:
The applicant argued that they received finished clutches from their Unit No. 1 and vendors, sometimes re-packing and MRP marking them before clearing on payment of duty, while in other cases, they cleared the clutch assemblies as such and reversed the credit under Rule 3(5) of the CENVAT Credit Rules. The Tribunal noted that the applicant reversed the credit on goods cleared as such, presenting a prima facie case for waiver of the duty, interest, and penalty. The Tribunal found that the Commissioner did not properly consider the applicant's actions, leading to the waiver of the predeposit of duty, interest, and penalty during the appeal's pendency.

Issue 3:
The learned AR reiterated the Commissioner's findings, stating that the applicant availed credit on finished goods improperly and referenced a decision of the Hon'ble Kerala High Court. The Tribunal, after considering both sides and perusing the records, concluded that the applicant, being a deemed manufacturer under Section 2(f) of the Central Excise Act, could clear goods after reversing the credit under Rule 3(5) of the CENVAT Credit Rules. The Tribunal allowed the stay application, recognizing the applicant's prima facie case for waiver of the duty, interest, and penalty.

Issue 4:
The Tribunal granted the applicant's early hearing application, fixing the appeal for hearing due to the significant duty amount involved. The Tribunal acknowledged the applicant's compliance with reversing credits and the waiver of predeposit during the appeal, emphasizing the need for proper consideration of facts and a prima facie case for relief.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the Tribunal's findings and decisions on each matter.