CX - s. 2(f) - Plastic films subjected to printing using rotogravure cylinders - Later, laminated by binding & laminates then taken for slitting into proper size - process amounts to manufacture - no reversal of CENVAT credit: CESTAT
By TIOL News Service
MUMBAI,MAR 10, 2014: THE appellants are engaged in manufacturing of packaging material falling under Chapter 39 and other final products, falling under Chapters 47,48, 74, 76 and 84 of the Central Excise Tariff Act, 1985. They also avail CENVAT Credit of duty paid on the inputs/raw materials and capital goods used in or in relation to the manufacture of the above final products.
The appellant have been clearing the aforementioned packaging materials pursuant to manufacture on payment of excise duty under sub-heading 39.20 and 39.21 for about two decades. The products manufactured by the appellant firm were packing materials for their buyers. Some of these products are used by buyers as wrappers for their products and the rest would be used for making pouches for packing of the other products.
Pursuant to the decision of the Supreme Court in the case of Metlex India Pvt. Ltd. vs. Commissioner of Central Excise, New Delhi - (2004-TIOL-77-SC-CX) wherein it was held that laminating/metallising of duty paid film does not amount to manufacture as the product is a film to start with and remains a film after lamination or metallization and no new and distinct product comes into existence, SCNs were issued to the appellant to show cause as to why the CENVAT credit on taken in respect of inputs used in the manufacture of goods cleared for home consumption on payment of duty and cleared without payment of duty under Rule 19 or against CT. 1, CT.3, Annexure-1 etc. should not be recovered along with interest and as to why penalty should not be imposed; the amounts of duty paid and collected from buyers should not be treated as “deposit” with the Central government in terms of s.11D of the CEA, 1944 and transferred to the Consumer Welfare Fund along with recovery of interest u/s 11DD.
The CCE, Mumbai-III was pleased to confirm the demand notices in the following manner -
++ Rs.18,74,64,804/- was confirmed on account of CENVAT Credit taken on inputs which were used in the process of manufacture and cleared on payment of duty for home consumption or export.
++ Rs.10,93,85,227/- was confirmed towards CENVAT Credit taken on inputs and were finally cleared without payment of duty for export under Rule 19(1) of the Central Excise Rules, 2002 or against CT-1 and CT-3.
++ Rs.18,74,64,804/- with Edu. Cess + HSE Cess paid by the assessee as duty on finished goods and recovered/collected from the buyers be treated as deposit with the Revenue and be transferred to Consumer Welfare Fund along with interest at appropriate rate on the above under Section 11A and Section 11DD
++ Penalty of Rs.10 lakhs was also imposed under Rule 1591) of the CCR, 2004.
Being aggrieved, the appellant is in appeal before the Tribunal.
Incidentally, while granting waiver of pre-deposit and ordering Stay in the matter, the Bench had observed thus -
"3. …The activity referred to by both sides comprises lamination of duty-paid film and printing thereon, yielding a product which served as packing material for the assessees customers. Apparently, these packing materials were used by the buyers to make their own products marketable. Such significant factual aspects were missing in the case of Metlex considered by the apex court. Unlike in the instant case, the Revenue in the case of Metlex claimed that the activity of laminating/metalising duty-paid film amounted to manufacture as they wanted to levy duty on the laminated/metalised product. In the instant case, it is the other way round. The assessee paid duty on the laminated/printed material and this duty is with the Revenue. Prima facie, it appears that the present case is more comparable to the case of Metlon India (supra) than the case of Metlex. Therefore, the appellant can legitimately claim support from the stay order passed by this Tribunal in Metlon's case and the subsequent stay orders passed by this Tribunal following Metlon India (supra). Yet another factor which needs to be considered is that the CENVAT credit which is sought to be denied to the assessee is lower than the amount of duty paid by them on the commodity which the department would not recognize as excisable goods. It further appears that the duty paid on the commodity would be available as CENVAT credit to the appellant's customers. Moreover, the duty paid by the appellant on the laminated/printed material is said to be a deposit under section 11D as per the impugned order. For the applicability of section 11D, there are two mandatory requirements, firstly, it can be invoked against a person who is liable to pay duty and secondly, such liability should be in respect of 'excisable goods'. If the duty paid by the appellant has been treated by the Commissioner as a deposit under section 11D, the Commissioner has virtually recognized the commodity to be an 'excisable product' and its manufacturer to be liable to pay duty thereon. Thus, self-contradiction is writ large on the impugned order."
We had reported this case more than three and half years ago as (2010-TIOL-954-CESTAT-MUM).
The appeal was heard recently.
And the Bench in the minimum number of words held -
"6. Having considered the rival contentions, we are of the view that the process/conversion undertaken by the appellant amounts to manufacture in the light of ruling of the co-ordinate Bench decision of this tribunal in the case of Markwell Paper Plast Pvt. Ltd. (supra) (2012-TIOL-2046-CESTAT-DEL). Thus, the appeal is allowed with consequential relief, if any."
