Tribunal: Labeling 'polyurethane resin' as 'solvent free adhesive' not manufacturing. Emphasizes proper credit utilization.

The Tribunal held that labeling 'polyurethane resin' as 'solvent free adhesive' did not amount to manufacture under the law, rejecting the appellant's claim for Cenvat credit. The decision emphasized the necessity for assessing the proper credit utilization and adjusting the demand, interest, and penalty amounts accordingly. The Tribunal directed the lower authority to determine the credit utilized for resin clearance and reduce the demand accordingly, highlighting that not all credit was used for the resin.

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Issues:
Classification of goods for Cenvat credit - Whether labeling activity amounts to manufacture - Utilization of credit for clearance of final product

Analysis:
1. The appellants imported 'polyurethane resin' and 'castor oil,' labeling them as 'solvent free adhesives' and 'solvent free hardener,' respectively, with specific code numbers and their name. The goods were cleared after labeling, and the appellants claimed Cenvat credit. A show cause notice was issued, denying the credit on the grounds of no processing or manufacture.

2. The appellants argued that labeling activities constitute manufacture under Chapter Note (5) to Chapter 15, making them eligible for Cenvat credit. They cited various case laws to support their contention, emphasizing that the credit, once utilized for clearance, cannot be recovered, relying on legal precedents like CCE v. Creative Enterprises and Vickers Systems International Ltd.

3. The Hon'ble Supreme Court's decision in CCE v. Converter Adhesives & Chemicals (P) Ltd. was referenced to support the classification of goods as adhesives under Chapter 35.06. The Commissioner (AR) contended that labeling under Chapter 39 does not amount to manufacture, and selling goods in a set does not permit Cenvat credit.

4. The Tribunal examined the submissions and found that the labeling activity did not amount to manufacture under the law. The goods were sold as such without any transformation, and selling adhesives and hardener together did not constitute manufacture. The Supreme Court decision cited was relevant for product classification, not the manufacturing process.

5. While acknowledging the appellant's argument on credit utilization, the Tribunal directed the lower authority to determine the credit utilized for polyurethane resin clearance and reduce the demand accordingly. The decision highlighted that not the entire credit was used for the resin, necessitating a review of interest and penalty calculations.

6. In conclusion, the Tribunal held that the labeling activity on polyurethane resin did not amount to manufacture, rejecting the appellant's claim for Cenvat credit. The decision emphasized the need for proper utilization assessment and adjustments in the demand, interest, and penalty amounts accordingly.

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