2019 (2) TMI 1225 - AT - Central Excise

Appellant's Re-packing Activity Not 'Manufacture' under Chapter Note 10

M/s Cadila Pharmaceuticals Ltd Versus C.C.E. & S.T., - Ahmedabad-iii

The Tribunal held that the appellant's re-packing/re-labelling activity of imported goods did not amount to 'manufacture' as per Chapter Note 10 of ... CENVAT credit - imported input cleared as such - process of manufacture taken place or not - the case of the department is that since the imported input sold as such on which credit was taken, the appellant is require to reverse the actual cenvat credit - extended period of limitation - Held that:- It is clear that re-packing/re-labelling activity which was carried out by the appellant alone will not amount to manufacture but along with re-packing/re-labelling there should be an activity i.e. conversion from bulk pack to retail pack to render the product as manufactured goods. This issue has been settled in the case of M/s Amritlal Chemaux Ltd [2015 (5) TMI 700 - SUPREME COURT] wherein the identical Chapter Note has been dealt with and the Hon’ble Supreme Court held that the activity of re-packing/re-labelling alone does not amount to manufacture - Accordingly, the appellant’s activity being only re-packing/re-labelling of imported goods does not amount to manufacture, therefore, the clearance of such goods shall be correctly treated as removal of input as such. Extended period of limitation - Held that:- It is not only the appellant but also department throughout in the case of M/s Amritlal Chemaux Ltd and even in the case of CCE, Mumbai Vs. Johnson & Johnson Ltd. [2005 (9) TMI 85 - SUPREME COURT OF INDIA] taken a stand that the activity similar to the activity carried out by the appellant is amount to manufacture. The issue was finally settled by the Hon’ble Supreme Court, therefore, when the department itself was of the view that the activity of re-packing/re-labelling alone is amount to manufacture - The same bonafide belief was entertained by the appellant which cannot be construed as malafide intention to evade the payment of duty, therefore, the demand for the extended period cannot be raised. In the present case, demand of the period 2006-07 to 2007-08 was raised by SCN dated 16.02.2009, therefore, the entire demand is under extended period, hence the same will not sustain on the ground of limitation - appeal allowed on the ground of limitation. Issues:1. Interpretation of Chapter Note of Chapter 29 regarding re-packing and re-labelling activity.2. Whether re-packing/re-labelling activity amounts to manufacture.3. Applicability of extended period for demand of duty.Analysis:Issue 1: Interpretation of Chapter Note of Chapter 29 regarding re-packing and re-labelling activity:The appellant, engaged in the manufacture of excisable goods, availed cenvat credit under Cenvat Credit Rules, 2004. The case involved the interpretation of Chapter Note 10 of Chapter 29, which states that certain activities like re-packing and re-labelling can amount to 'manufacture.' The appellant's argument was based on the interpretation of this chapter note and whether their activity fell under this definition.Issue 2: Whether re-packing/re-labelling activity amounts to manufacture:The Tribunal analyzed the case law precedent, specifically referring to the judgment in the case of CCE Vs. M/s Amritlal Chemaux Ltd., where the Supreme Court held that re-packing/re-labelling alone does not amount to manufacture. The Tribunal concluded that the appellant's activity of re-packing/re-labelling imported goods did not amount to manufacture, as there was no conversion from bulk packs to retail packs. Consequently, the clearance of such goods was considered as the removal of input as such, requiring the appellant to pay duty equal to the cenvat credit availed.Issue 3: Applicability of extended period for demand of duty:Regarding the demand raised by the department, the Tribunal focused on the issue of limitation. The appellant argued that the demand invoking the extended period was time-barred due to a bonafide belief that the re-packing/re-labelling activity constituted manufacture. The Tribunal considered the appellant's reliance on Circular No. 576/13/2001-CX and previous departmental views to support their belief. Ultimately, the Tribunal set aside the impugned order solely on the ground of limitation, allowing the appeal.In conclusion, the Tribunal's judgment addressed the interpretation of the relevant chapter note, the determination of whether the appellant's activity constituted manufacture, and the applicability of the extended period for the demand of duty. The decision highlighted the importance of legal precedents, the specific wording of statutory provisions, and the significance of bonafide belief in tax matters.