Repacking and relabelling as manufacture, plus GTA credit on input transport, sustained the assessee's CENVAT claims.

Chapter Note 9 to Chapter 28 treated labelling or relabelling of containers and repacking from bulk packs into retail packs as manufacture for inorganic chemicals. On that basis, repacking cerium chloride from 1 MT bulk packs into 25 kg packs with relabelling qualified as manufacture, so CENVAT credit linked to the imported input and related services was admissible. GTA service tax credit was also allowable because the transported glass cullets were undisputedly used in manufacturing lead oxide and zinc oxide, giving the transportation services a direct nexus with manufacture. The demand, interest and penalty were therefore unsustainable, and the assessee was entitled to the disputed credits.

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Issues: (i) whether repacking of cerium chloride from 1 MT bulk packs into 25 kg packs with relabelling amounted to manufacture so as to justify availment of cenvat credit on additional customs duty and related input services; and (ii) whether cenvat credit of service tax paid on GTA services for transportation of glass cullets used in manufacture could be denied.

Issue (i): whether repacking of cerium chloride from 1 MT bulk packs into 25 kg packs with relabelling amounted to manufacture so as to justify availment of cenvat credit on additional customs duty and related input services.

Analysis: Chapter Note 9 to Chapter 28 treats labelling or relabelling of containers and repacking from bulk packs to retail packs, or other treatment to render the product marketable, as manufacture in relation to products of that chapter. Cerium chloride is an inorganic chemical falling under Chapter 28. The imported material was repacked from 1 MT bulk packs into 25 kg packs and relabelled. The process therefore satisfied the statutory description of manufacture, and the credit linked to such imported input and related services was admissible.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): whether cenvat credit of service tax paid on GTA services for transportation of glass cullets used in manufacture could be denied.

Analysis: It was undisputed that the glass cullets were used in the manufacture of lead oxide and zinc oxide. GTA services used for transporting such input material had a direct nexus with manufacture, and the related service tax credit could not be refused on that basis.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The demand, interest, and penalty were unsustainable, and the assessee was held entitled to the disputed cenvat credits.

Ratio Decidendi: Where a chapter note deems repacking and relabelling of bulk packs into retail packs to be manufacture, credit linked to such activity cannot be denied, and GTA credit is admissible when the transported goods are used as inputs in manufacture.

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