2013 (11) TMI 1210 - AT - Central Excise

Denial of Cenvat credit Activity Manufacture OR Not - Waiver of Pre-deposit - The applicant availed cenvat credit on the inputs and input services used by them for export of goods - Revenue was of the view that the activities of packing / repacking, labelling/relabeling and anti-rust treatment are for the purpose of safe transport of the components are not amounting to manufacture u/s 2(f) (iii) of the Central Excise Act, 1944 Held that - Relying upon L&T Ltd. Vs UOI 2008 (2) TMI 645 - HIGH COURT BOMBAY - Inserting clause (iii) in Section 2(f), the definition of manufacture has widened and the process undertaken would cover within the definition - The adjudicating authority relied upon the CBEC circular dated 8.10.1997 and in respect of the definition of manufacture prior to amendment of Section 2(f) as on 1.3.03 - Prima facie, the processes undertaken by the applicant would amount to manufacture within the definition of manufacture under section 2(f) (iii) of the Act - the entire goods was cleared on payment of duty and duly exported - the denial of cenvat credit on the input and input service used in the finished goods cleared on payment of duty, is not justified - the requirement of pre-deposit of entire amount of duty and penalty along with interest waived till the disposal Stay granted.

Summary

Issues:
Denial of cenvat credit for activities related to packing, labelling, and anti-rust treatment for export goods under Central Excise Act, 1944.

Analysis:
The appellant, engaged in exporting auto parts, faced denial of cenvat credit by the adjudicating authority for activities like packing, labelling, and anti-rust treatment. The authority claimed these processes did not amount to manufacturing under Section 2(f) (iii) of the Central Excise Act, 1944. The appellant argued that these processes were essential for exportation and cited relevant case law to support their claim. They highlighted the widened definition of manufacture under Section 2(f) (iii) and emphasized the utilization of the credit for export purposes.

The learned counsel for the appellant pointed out the relevance of the show cause notice detailing the processes undertaken for exportation. The appellant's position was supported by the insertion of clause (iii) in Section 2(f), broadening the definition of manufacture. Contrary to the adjudicating authority's stance, the appellant contended that the processes undertaken fell within the scope of manufacturing activities as per the statutory definition.

On the other hand, the respondent relied on past decisions to argue that labelling or re-labelling did not constitute manufacturing. Citing cases like Lakme Lever Ltd. and Lupin Laboratories Ltd., the respondent reiterated that certain processes, including labelling, did not amount to manufacturing. However, after considering both arguments and reviewing the records, the Tribunal found merit in the appellant's submissions.

The Tribunal observed that the processes undertaken by the appellant, such as unpacking, anti-rust treatment, packing, and labelling, aligned with the definition of manufacture under Section 2(f) (iii). Referring to the Hon'ble Bombay High Court's judgment in a related matter, the Tribunal emphasized that the denial of cenvat credit for essential processes related to export goods was unjustified. The Tribunal noted that the goods were cleared and exported after payment of duty, further supporting the appellant's claim. Consequently, the Tribunal waived the predeposit of the duty and penalty, allowing the stay of recovery during the appeal process.