2015 (6) TMI 578 - AT - Central Excise

Denial of CENVAT Credit - sale of finished goods after repacking - Held that - In the new factory, proper packing was undertaken, and goods were cleared on payment of duty by utilizing the CENVAT credit of duty paid at the time of shifting of goods. I find that even if the appellants have not followed the provisions of Rule correctly, it is only a technical omission on the part of the appellant and it cannot be said that there is revenue loss. Moreover, the claim that appellants had done proper packing for the purpose of marketing has not been contradicted or there is no contrary finding. The only claim of the department is that the finished goods were cleared and there was no process undertaken on it and therefore, the CENVAT credit could not have been taken. If the proper packing was not done and further packing was undertaken in the new premises, it would amount to clearance of semi-finished goods and in my opinion, the procedure followed by the appellant is acceptable. The second issue involved is the availment of CENVAT Credit by the appellant in respect of services which are utilized for trading as well as manufacturing. During the relevant period, the trading was not defined as a deemed service and therefore it can not be considered as an exempted service. Even though learned advocate offered to present detailed arguments on this issue, when it was pointed out that in the case of Orion Appliances Ltd., Vs CST Ahmedabad 2010 (5) TMI 85 - CESTAT, AHMEDABAD , the very same Member who is passing this order had taken a view that proportionate credit attributable to trading activity has to be reversed. - Decided partly in favour of assessee.

Summary

Issues involved:
1. Availment of CENVAT credit on finished goods shifted to a new factory without following Rule 10(3) of CENVAT Credit Rules.
2. Availment of CENVAT credit on services used for both trading and manufacturing activities.

Analysis:

Issue 1: Availment of CENVAT credit on finished goods shifted to a new factory without following Rule 10(3) of CENVAT Credit Rules:
The appellant shifted their factory to a new premises and cleared finished goods from the old premises to the new one after paying duty and utilizing CENVAT credit. The department contended that the process amounted to manufacture and denied the CENVAT credit. The appellant argued that proper packing was done for marketing purposes, and even though Rule provisions were not strictly followed, there was no revenue loss. The tribunal found the appellant's procedure acceptable as proper packing was crucial for marketing, and the process did not result in revenue loss. Therefore, the appeal was allowed on this issue.

Issue 2: Availment of CENVAT credit on services used for trading and manufacturing activities:
The second issue involved the appellant's availment of CENVAT credit on services used for both trading and manufacturing. During the relevant period, trading was not considered a deemed service. The tribunal referred to a previous case where it was held that proportionate credit related to trading activity must be reversed. The appellant agreed to reverse the proportionate credit attributable to trading activity in line with the previous decision. Consequently, the tribunal allowed the appeal on Issue No. 1 regarding CENVAT credit on shifted goods and directed the appellant to reverse the proportionate credit related to trading activity as per the previous ruling. The appeal was disposed of accordingly.

In conclusion, the tribunal allowed the appeal on the first issue concerning CENVAT credit on finished goods shifted to a new factory, considering the marketing requirements and absence of revenue loss. The appellant was directed to reverse the proportionate credit related to trading activity as per a previous decision on the second issue.