CENVAT - Activity of sieving & packing is not notified as manufacturing in respect of goods falling under Chapter 25 - hence it cannot be said that appellant manufactured exempted goods - since appellant has taken credit of 4% SAD on imported inputs, they are required to reverse the same: CESTAT
By TIOL News Service
MUMBAI, MAR 11, 2014: THREE appeals have been filed by the appellant assessee and one by the Revenue.
Brief facts of the case are that the assessee is a manufacturer of boric acid which is cleared on payment of Central Excise duty. The appellant procured two inputs namely LBU 30 and LBU 60 which are required for manufacturing of boric acid. Prior to March 2006, both the inputs were exempted from payment of all duties. With effect from March 2006 these inputs were required to pay 4% SAD on the import of the said inputs. The appellant paid SAD @ 4% and took the CENVAT credit of the said duty. These inputs namely LBU 30 and LBU 60 were also cleared after sieving and repacking into local market without reversing any credit or on payment of any duty.
Since the assessee was manufacturing dutiable and exempted goods but was not maintaining separate accounts of inputs used for the aforesaid goods, demand notices were issued invoking rule 6(2) of CCR, 2004 asking the assessee to pay 5%/10% of the value of the ‘exempted' goods.
During the course of investigation, the assessee paid the “amounts” and the same was appropriated in the adjudication proceedings. Against these orders of the CCE, Thane-I , the assessee is in appeal.
However, in another case, the Commissioner(A) held that the goods which are called as exempted goods are not exempted goods as the inputs LBU 30 and LBU 60 have been cleared as such without any manufacturing activity and, therefore, the assessee is required to reverse only the quantum of 4% SAD availed by them as credit.
Revenue is in appeal against this order on the premise that the activity of sieving and repacking amounts to manufacture and hence the appellants have manufactured exempted goods and they are required to pay 5%/10% of the value of LBU 30 and LBU 60 cleared by them.
Before the CESTAT the appellant submitted that the sieving and repacking of the imported inputs LBU 30 and LBU 60 is not a manufacturing activity as per Chapter 25 of the Central Excise Tariff Act and, therefore, they are not a manufacturer of the exempted goods. Since they have cleared the inputs as such without reversing the credit availed by them, at the most, they have to reverse the credit availed on such inputs. Moreover, since they have paid substantial amount during the course of investigation, the same can be appropriated against the amount of reversal of credit availed of 4% SAD on these inputs. Reliance is placed on the decision in S.D. Fine Chem Ltd. vs. CCE Thane I - 2011-TIOL-2032-CESTAT-MUM.
The Revenue representative reiterated the findings of the adjudicating authority.
The Bench observed -
"6. We do agree with the contention of the learned Advocate 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. (supra) 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.
7. With these observations, appeals of BML are allowed with consequential relief and the appeal filed by the Revenue is dismissed. The adjudicating authority shall implement this order within 30 days of the receipt of the same."
In passing: Hope the consequential relief is granted without any unjust enrichment and penalty and interest! And by the way, the Board is contemplating making some amendment to rule 6 of the CCR, 2004 as can be inferred from F.No.17/1/2012-CX.1 dated December, 23, 2013.
(See 2014-TIOL-381-CESTAT-MUM)
