2014 (3) TMI 379 - AT - Central Excise

Availment of CENVAT CRedit - Reversal on SAD - manufacture of exempted and dutiable goods - Held that - as per Chapter 25 of the Central Excise Tariff Act the activity of sieving and repacking does not amount to manufacture. Therefore, BML is not manufacturing exempted goods. Although BML cleared LBU 30 and LBU 60 as such they are required to reverse CENVAT credit availed on these inputs which have been cleared as such. In these circumstances relying on the decision of S.D. Fine Chem Ltd. (2012 (6) TMI 44 - CESTAT, MUMBAI) we hold that BML is required to pay 4% SAD availed on the inputs LBU 30 and LBU 60 and cleared as such by them - they are not required to pay 5%/10% of the value of the exempted goods. - Decided in favor of assessee.

Summary

Issues:
1. Whether the activity of sieving and repacking amounts to manufacture?
2. Whether the appellant is required to maintain separate accounts of inputs for exempted and excisable goods?
3. What is the liability of the appellant regarding the payment of duties on exempted goods?

Analysis:
1. The case involved appeals filed by the appellant, a manufacturer of boric acid, and the Revenue regarding the treatment of inputs LBU 30 and LBU 60, which were previously exempted from duties but later subjected to 4% SAD. The main contention was whether the sieving and repacking of these inputs constituted manufacturing of exempted goods. The appellant argued that as per Chapter 25 of the Central Excise Tariff Act, sieving and repacking did not amount to manufacture. The Tribunal agreed, holding that the appellant was not manufacturing exempted goods and was only required to reverse the CENVAT credit availed on these inputs. The decision was supported by a previous case law.

2. The Revenue contended that since the appellant was manufacturing both excisable and exempted goods without maintaining separate accounts, they were liable to pay 5%/10% of the value of the exempted goods. However, the Tribunal disagreed, stating that as per Rule 6(3) of the CENVAT Credit Rules, 2004, the appellant was only required to pay the 4% SAD availed on the inputs cleared as such without any additional duty.

3. Ultimately, the Tribunal allowed the appeals of the appellant, M/s. Borax Morarji Ltd., providing them with consequential relief. The appeal filed by the Revenue was dismissed, and the adjudicating authority was directed to implement the order within 30 days. The judgment clarified the liability of the appellant regarding the payment of duties on the exempted goods, emphasizing the distinction between manufacturing activities and the reversal of credits on inputs cleared without further processing.