Tribunal overturns decision on "manufacture," allows duty adjustment. Impact on duty levy and modvat credit eligibility.

The Tribunal set aside the adjudicating authority's decision that repacking did not amount to "manufacture," allowing the appellants' appeal. The Tribunal emphasized that the determination of manufacture directly affects duty levy and modvat credit eligibility. As the appellants paid more duty than claimed credit, the duty paid should have been adjusted. The Tribunal referenced a Commissioner's contrary order for a subsequent period, concluding that the appellants were not liable to pay duty or lose credit.

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Issues involved: Determination of whether the activity of repacking constitutes "manufacture" for the purpose of claiming modvat credit and payment of duty.

Summary:
The appellants were engaged in repacking Elmoluft 1A on behalf of a company, receiving the drug in bulk packs and repackaging it into smaller units for sale. They paid Central Excise duty on the repackaged goods and also claimed credit for the duty paid on the bulk drug received. The adjudicating authority held that the repacking activity did not amount to manufacture, disallowing the credit claimed and demanding the amount taken as modvat credit, imposing penalties. The appellants argued that they were registered as manufacturers, paid duty on the repackaged goods, and the Revenue had accepted the payments. They contended that if their activity was not considered manufacture, they should not be liable to pay duty or lose the credit. The Tribunal reviewed the submissions and found the impugned order unjust, stating that the determination of manufacture directly impacts the levy of duty and eligibility for modvat credit. As the appellants had paid more duty than the credit claimed, the proper action should have been to adjust the duty paid against the credit. Citing a contrary order by the Commissioner for a subsequent period, the Tribunal set aside the impugned order and allowed the appeal.

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