2023 (5) TMI 188 - AT - Central Excise

Revenue neutrality - Process amounting to manufacture - repacking of bulk packages of imported STPP into retail pack of 40/50 Kgs. in HDPP bags - excisable under Chapter sub-heading No. 28353100 of Central Excise Tariff Act, 1985 or not - Extended period of limitation - HELD THAT - There is no dispute that all the goods on which the duty was demanded have been imported duly duty paid including CVD/SAD. In such case, if at all there is any duty liability of repacked goods or alleged clandestine removal or sales under dealer invoice or repacking job work, in all these cases, the appellant were entitled for the Cenvat credit in respect of the goods imported/ purchased by them. If on reconciliation it is found that duty is payable on the goods being deemed manufactured in terms of Chapter note 9 to note 28, in all such cases it prima-facie appears that the appellant is entitled for Cenvat credit on the goods procured and if such Cenvat credit is sufficient to adjust against the demand of output then the entire case is Revenue neutral and in such case, no further demand can be raised. However, this reconciliation exercise has not been conducted therefore in our considered view the matter needs to be reconsidered on this issue. The respondent is required to submit reconciliation showing co-relation between the procurement and Cenvat involved therein and the sale of the goods involving duty payable thereon. After verifying these details, the Adjudicating Authority shall pass a fresh order keeping in mind the observation. Matter remanded to the Adjudicating Authority for passing a fresh order within a period of two months from the date of this order - appeal allowed by way of remand.

Summary

Issues involved:
The appeal against the impugned order-in-original passed by the Commissioner of CGST & Central Excise Bhavnagar, involving excise duty demand, penalty, and interest on the respondents.

Details of the judgment:

Issue 1: Excisability of repacking activity
The respondents were engaged in importing Sodium Trio Poly Phosphate (STTP) in bulk and repacking it into retail packs, which was considered as manufacturing activity under Chapter Note 9 to Chapter 28. The respondents had obtained Central Excise Registration and were paying excise duty on the retail packs cleared for home consumption. The Directorate General of Central Excise Intelligence (DGCEI) issued a show cause notice proposing duty demand based on various counts of repacking and clearance without payment of excise duty.

Issue 2: Revenue neutrality and Cenvat credit
The appellant argued that all goods were imported duty paid, including CVD/SAD, and any duty liability on repacked goods or alleged clandestine removal could be adjusted from Cenvat credit. The reconciliation exercise to determine the duty payable and Cenvat credit adjustment was not conducted. The Tribunal found that if the Cenvat credit was sufficient to adjust against the demand of output, the case would be revenue-neutral, and no further demand could be raised. The matter was remanded to the Adjudicating Authority for a fresh order after the reconciliation exercise.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter for a fresh order within two months, emphasizing the need for reconciliation to determine revenue neutrality. The appeals were disposed of by way of remand, with the cross objection also being disposed of.

*(Pronounced in the open court on 03.05.2023)*