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2018 (4) TMI 1492 - AT - Central ExciseManufacture - whether the activity of metalizing undertaken by the assessee amounts to manufacture or not? - Held that - After metallization process the polypropylene film is no longer a film with insulting properties but a metalized film with conducting properties ready to be used in capacitors. Therefore, the raw material has been transformed into something new i.e. Electronic Capacitor Grade Aluminium Metalized Dielectric Plastic Film which can be used for manufacturing electronic capacitors and the Ministry of Communication and Information Technology clarified that there is a great deal of difference between the plastic film and the metalized film manufactured by the assessee. Benefit of N/N. 25/99-Cus dated 28.2.1999 and N/N. 25/2002-Cus dated 01.03.2002 - Held that - There is great deal of difference between description of imported goods and description of finished goods. If the description of imported goods and description of finished goods are same, then the notifications become redundant , it is not intention of the legislation - From the tenor of the notification, it is clear that inputs procured by the assessee are altogether different from the goods manufactured by the assessee. Refund claim of Cenvat credit - denial on the ground that the activity undertaken by the assessee does not amount to manufacture - Held that - in the present case, the activity undertaken by the assessee amounts to manufacturer, therefore, the assessee is entitled to refund of Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 which remains unutilized in the Cenvat credit account on export of goods. Appeal allowed - decided in favor of assessee.
Issues Involved:
1. Whether the activity of metalizing undertaken by the assessee amounts to manufacture. 2. Entitlement to Cenvat credit and refund of Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004. Issue-wise Detailed Analysis: 1. Whether the activity of metalizing undertaken by the assessee amounts to manufacture: The primary issue before the Tribunal was to determine if the process of metalizing polypropylene and polyester films, as carried out by the assessee, constitutes "manufacture" under the relevant excise laws. The assessee argued that their process of metalizing transforms the raw polypropylene/polyester film into a new product with distinct characteristics, namely the Electronic Capacitor Grade Aluminium Metalized Dielectric Plastic Film, which is used in manufacturing capacitors. This transformation involves a complex process of coating the film with metal and ensuring the resultant product has conducting properties, unlike the insulating properties of the raw film. The Tribunal noted the detailed process described by the Production Manager, which involves melting metals (aluminium and zinc), vacuumizing chambers, running the film over the coating chamber, and subsequent steps to ensure the metal adheres properly to the film. The end product is significantly different from the raw material, both in terms of physical properties and marketability. The Tribunal also considered the exemption notifications (No.25/99-Cus and No.25/2002-Cus) which provide concessional rates of duty for goods used in manufacturing specific finished goods. The descriptions in these notifications indicate that the imported raw materials and the finished goods are distinctly different, supporting the assessee's claim that their process results in a new product. The Tribunal distinguished the present case from the Supreme Court decision in Metelex India vs. CCE, where the activity of lamination/metalizing was not considered manufacture due to the lack of transformation into a new product. In contrast, the Tribunal found that the assessee's process does result in a new and distinct product, thus qualifying as "manufacture." 2. Entitlement to Cenvat credit and refund of Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004: The second issue was whether the assessee is entitled to Cenvat credit and the subsequent refund of unutilized Cenvat credit on exported goods. The department had denied the refund on the grounds that the metalizing process did not amount to manufacture, hence the Cenvat credit was not admissible. Given the Tribunal's conclusion that the metalizing process does amount to manufacture, it followed that the assessee was entitled to avail Cenvat credit on inputs used in the manufacturing process. Consequently, the denial of the refund claim was unfounded. The Tribunal emphasized that Rule 5 of the Cenvat Credit Rules, 2004, does not require the activity to amount to manufacture for a refund to be granted. Since the assessee had paid duty on the manufactured goods, they were entitled to the refund of unutilized Cenvat credit. Conclusion: The Tribunal held that the activity of metalizing undertaken by the assessee amounts to manufacture. As a result, the assessee is entitled to avail Cenvat credit and is also eligible for the refund of unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The appeal filed by the Revenue was dismissed, and the appeal filed by the assessee was allowed. The cross objection filed by the assessee was disposed of in the same terms.
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