Requirement of credit reversal if process does not amount to manufacture.

PJ/CASE LAW/2014-15/2542

Case:- PERFO CHEM (I) PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BELAPUR

Citation:-2015 (315) E.L.T. 237 (Tri. - Mumbai)

Brief facts:- The appeals are directed against Order-in-Original No. Belapur/31/Bel. I/R.IV/ Commr/SLM/10-11, dated 25-11-2010 & Belapur/53/Bel. I/R.IV/ Commr/SLM/10-11, dated 6-4-2011, passed by Commissioner of Central Excise, Navi Mumbai. Vide the impugned order, the adjudicating authority has confirmed a duty demand of Rs. 5,55,56,927/- along with interest thereon against M/s. Perfo Chem (I) Pvt. Ltd. and an amount of Rs. 42,78,404/- along with interest thereon against M/s. Brom Chem (India) Pvt. Ltd. He has also imposed an equivalent amount of penalties. Reason for confirming these demands are that the activity of packing, labelling, etc. undertaken by the appellant on the various chemicals does not amount to manufacture and therefore, the appellant should not have availed Cenvat credit on the various inputs which has gone into labelling undertaken by the appellant company. Aggrieved of the same, the appellants are before Tribunal.

Appellant’s contention:-The learned Counsel for the appellant submits that in the instant case, the appellant has paid duty which is more than the amount of credit taken, even if the activities are held to be not amounting to “manufacture” and the payment of duty more than the credit taken would tantamount to reversal of credit. Therefore, the impugned demands are not sustainable in law. He relies on the decision of the Hon’ble Apex Court in the case of C.C.E. & C., Vadodara v. Narmada Chematur Pharmaceuticals Ltd. - 2005 (179) E.L.T. 276 (S.C.) andCCE v. Creative Enterprises - 2009 (243) E.L.T. (A120/121) (S.C.) and the decision of this Tribunal in the case of Ajinkya Enterprises v. CCE, Pune - 2009 (243)E.L.T.566 (Tri.-Mum.) and the recent decision of this Tribunal in the case of Panchsheel Filters Pvt. Ltd. vide Order No. A/450/14/EB/C-II, dated 18-6-2014. In all these decisions also on identical issue had come up for consideration and the Hon’ble Apex Court and this Tribunal held that even if the activity undertaken by the appellant does not amount to manufacture but if the duty liability has been discharged treating the activities as ‘manufacture’ and such duty payment is equivalent to or more than the credit taken, the same shall amount to non-availment of credit and consequently no reversal of credit is required to be made. Therefore, he pleads for allowing the appeals.

Respondent’s contention:- The learned Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority and submits that the appellants have undertaken only labelling of the goods, which does not amount to manufacture and if an activities does not amount to “manufacture”, the question of paying duty or taking credit would not arise. Therefore, he pleads for upholding the impugned order.

Reasoning of judgment:- It is not in dispute that the appellant discharged duty liability on the activity undertaken by him by treating it as “manufacture” and the payment of duty so made was more than the amount of credit taken on the various inputs. In view of the undisputed facts mentioned above and in view of the decision of the Hon’ble Apex Court in the case of Narmada Chematur Pharmaceuticals Ltd. (cited supra) they hold that since the amount of duty paid is more than the credit taken, the same would tantamount to reversal of credit. Therefore, the appellant is not required to make any payments towards credit taken. Consequently, the impugned orders are not sustainable in law. Accordingly they set aside the same and allow the appeals.

Decision:- Appeals allowed.

Comment:- The analogy of the case is that if the activity undertaken by the appellant does not amount to manufacture but if the duty liability has been discharged treating the activities as ‘manufacture’ and such duty payment is equivalent to or more than the credit taken, the same shall amount to non-availment of credit and consequently no reversal of credit is required to be made.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2542

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