2022 (10) TMI 797 - AT - Central Excise

Tribunal rules in favor of appellant on Cenvat Credit and duty liability issues.

The tribunal ruled in favor of the appellant on all three issues. They allowed the utilization of Cenvat Credit for payment of duty on goods procured ... Utilization of CENVAT Credit for payment of Excise duty - goods procured under Notification No. 43/2001-CE (NT) for the clearance of the same without putting to use for manufacture of exported goods - HELD THAT:- The identical issue has been considered by the tribunal in the matter of M/S. SHREE RAJASTHAN SYNTEX LTD., SHRI S.K. BHANDARI AND SHRI V.K. LADIA VERSUS CCE, JAIPUR-II [2016 (3) TMI 200 - CESTAT NEW DELHI], M/S. SHREE RAJASTHAN TEXCHEM LTD. VERSUS CCE, JAIPUR [2015 (2) TMI 653 - CESTAT NEW DELHI] and GINGER CLOTHING PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE [2014 (2) TMI 868 - CESTAT MUMBAI] and the payment of duty on the goods procured under Notification 43/2001-CE (NT) by utilization form cenvat credit for payment has been allowed - Therefore, following the said decisions it is held that the demand of duty can be paid by utilizing cenvat credit being no bar in law in this regard. CENVAT Credit - inputs and packing materials used in the manufacture of medicament (exhibit batches) and the same is tested for trial and quality purpose and were destroyed / disposed off within the factory thereafter - HELD THAT:- There is no dispute in the facts that packaging /raw materials on which Appellant has claimed Cenvat credit has been used in process of manufacturing of medicaments for trial and testing purpose and quality purpose under the Drugs and Cosmetic Act, which was subsequently destroyed. On the basis of such testing /quality control process only the marketability of the product is ascertained. Accordingly, the raw materials/ packaging materials which is used in manufacturing and which goes for testing /quality process are indeed the inputs which are used in or in relation to manufacturing of final products. The nature of products manufactured by the Appellant is such that it is a must/ necessity that it needs testing and hence, the same forms an integral part of manufacture and without which it is not possible to manufacture the final products. Thus, the Appellant is entitled for credit on input and packaging materials used for testing products (Exhibit batches) - reliance can be placed in the case of THERMAX CULLIGAN WATER TECHNOLOGIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [2013 (12) TMI 977 - CESTAT MUMBAI] where it was held that In the present case, the Revenue has not adduced any evidence that the control samples have been removed from the factory and has not been consumed or lost or destroyed during the course of testing. In the absence of any corroborative evidence of removal of these samples from the factory, the demand of duty on such control samples cannot be sustained. Whether the Appellant is liable to pay duty on goods cleared from factory on non-returnable challans for testing and sampling purpose? - HELD THAT:- The pharmaceutical goods before being marketed should be sent for tests and sampling purpose in terms of the provisions of Drugs and Cosmetics Act, 1945. The medicaments cleared under the cover of non-returnable challans for testing and sampling purpose cannot be considered as manufactured goods as the same is not marketable in as much as the same has not attained any level of marketability as is clear from the facts that the same was sent outside the factory premises for testing and sampling purpose. Marketability is decisive test for dutiability - the samples cleared for testing and quality control test are not liable to any excise duty. No demand is sustainable - Appeal allowed - decided in favor of appellant. Issues Involved:1. Utilization of Cenvat Credit for payment of duty on goods procured under Notification No. 43/2001-CE (NT).2. Entitlement to Cenvat Credit for inputs and packing materials used in the manufacture of medicament (exhibit batches) subsequently destroyed.3. Liability to pay duty on goods cleared from the factory on non-returnable challans for testing and sampling purposes.Issue-Wise Detailed Analysis:1. Utilization of Cenvat Credit for Payment of Duty:The primary issue was whether the duty on goods procured under Notification No. 43/2001-CE (NT) could be paid using Cenvat Credit. The tribunal referenced previous decisions, including Shree Rajasthan Syntex Ltd. and Ginger Clothing Pvt. Ltd., which permitted the payment of duty on such goods through Cenvat Credit. The tribunal concluded that there is no legal prohibition against utilizing Cenvat Credit for this purpose, thus allowing the appellant to pay the duty using Cenvat Credit.2. Entitlement to Cenvat Credit for Inputs and Packing Materials:The second issue concerned the appellant's entitlement to Cenvat Credit for inputs and packing materials used in the manufacture of 'exhibit batches' that were subsequently destroyed. The tribunal noted that the raw materials and packaging materials were used in the manufacturing process for trial and testing purposes under the Drugs and Cosmetic Act. This testing is integral to the manufacturing process, as it ensures the marketability and quality of the final product. The tribunal cited several judgments, including Thermax Culligan Water Technologies Ltd. and RPG Life Sciences Ltd., which supported the view that materials used in testing are considered inputs used in manufacturing. Consequently, the tribunal held that the appellant is entitled to Cenvat Credit for these materials.3. Liability to Pay Duty on Goods Cleared for Testing and Sampling:The third issue addressed whether the appellant was liable to pay duty on goods cleared from the factory on non-returnable challans for testing and sampling purposes. The tribunal found that these goods, sent for testing under the Drugs and Cosmetics Act, did not qualify as 'manufactured' since they were not marketable. The tribunal referred to several decisions, including those in the cases of Sahwala Cylinders (P) Ltd. and Bhansali Engg. Polymers Ltd., which consistently held that samples drawn for quality control testing are not subject to excise duty. Therefore, the tribunal concluded that the samples cleared for testing and quality control are not liable for excise duty.Conclusion:The tribunal set aside the impugned order, ruling that no demand was sustainable. The appeal was allowed with consequential relief, if any. This judgment was pronounced in the open court on 18.10.2022.