2021 (9) TMI 255 - AT - Central Excise

Labeling activity constitutes manufacturing, appellant's demands for credit recovery, interest, penalties set aside. Appeals allowed, impugned orders set aside.

The Tribunal found that the activity of labeling undertaken by the appellant amounted to manufacture. Consequently, the demands for recovery of wrongly ... Process amounting to manufacture or not - deemed manufacture - activity of labeling undertaken by the assessee - credit wrongly availed - rebate as per rule 18 of the Central Excise Rules, 2002 - separate marketable commodity emerged at the time of clearance of these goods from Jammu & Kashmir unit - demand of interest and penalty - HELD THAT:- The issue is squarely covered by the earlier decision in appellant’s own case JINDAL DRUGS LTD VERSUS CCE BELAPUR [2015 (2) TMI 833 - CESTAT MUMBAI] where it was held that the activity of fixing labels undertaken by the appellant, which is not in dispute, shall amount to manufacture as per Note 3 of Chapter 18 of the CETA although this activity does not enhance the marketability of the product. Appeal allowed - decided in favor of appellant. Issues Involved:1. Whether the activity of labeling undertaken by the assessee amounts to manufacture.2. Demand of wrongly availed CENVAT credit.3. Imposition of interest on the wrongly availed credit.4. Imposition of penalty under the provisions of Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC(1)(a) of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Whether the activity of labeling undertaken by the assessee amounts to manufacture:The Tribunal examined whether the labeling activities performed by the assessee at their Taloja factory constituted 'manufacture' under the Central Excise Act, 1944. The Commissioner had previously ruled in three separate orders that the labeling did not amount to manufacture. However, the Tribunal referred to a previous decision in the appellant's own case (2015-TIOL-857-CESTAT-Mumbai), which concluded that labeling per se amounts to manufacture as per Note 3 to Chapter 18 of the Central Excise Tariff Act (CETA), 1985. The Tribunal emphasized that labeling or relabeling of containers and repacking from bulk packs to retail packs are independent activities deemed to be manufacture. The Tribunal found that the activity of labeling undertaken by the appellant on the goods received from their Jammu factory and imported goods indeed amounted to manufacture.2. Demand of wrongly availed CENVAT credit:The Commissioner had demanded the recovery of wrongly availed CENVAT credit under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A(10) of the Central Excise Act, 1944, amounting to Rs. 6,33,22,839/-, Rs. 11,36,63,112/-, and Rs. 5,28,28,266/- in the three orders. The Tribunal, however, found that since the activity of labeling amounted to manufacture, the credit availed by the appellant was not wrongly availed. The Tribunal relied on the previous decision in the appellant's favor and set aside the demand for recovery of the credit.3. Imposition of interest on the wrongly availed credit:The Commissioner had also demanded interest on the wrongly availed credit under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944. The amounts were Rs. 3,39,465/-, Rs. 75,65,604/-, and Rs. 8,79,455/- respectively. Given that the Tribunal found the credit was not wrongly availed, the demand for interest was also set aside.4. Imposition of penalty under the provisions of Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC(1)(a) of the Central Excise Act, 1944:The Commissioner had imposed penalties equivalent to the amount of wrongly availed credit, with a provision for a reduced penalty if paid within 30 days. The Tribunal, following its finding that the credit was not wrongly availed, also set aside the penalties imposed.Conclusion:The Tribunal concluded that the activity of labeling undertaken by the appellant amounted to manufacture. Consequently, the demands for recovery of wrongly availed CENVAT credit, interest, and penalties were set aside. The appeals were allowed, and the impugned orders were set aside. The Tribunal also noted that the Supreme Court had not stayed the previous favorable decision for the appellant, and thus, the matter was not kept pending. The Tribunal's decision was pronounced in the open court.