Manufacture of metallized dielectric film supports Cenvat credit eligibility for inputs and capital goods used in production.

Conversion of plain plastic film into capacitor grade metallized dielectric plastic film is treated as manufacture under the amended Chapter Note 16 to Chapter 39 of the Central Excise Tariff Act, 1985, because the process results in a new product. Prior coordinate Bench rulings on similar facts were followed, with the earlier Supreme Court ruling on metallization distinguished and the later Dhruv Industries line noted as affirmed by the Supreme Court. Once the activity is manufacture, Cenvat credit on inputs and capital goods used in that process remains admissible, even where the intermediate product is cleared or used in producing dutiable final goods.

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Issues: Whether the process of making capacitor grade metallized dielectric plastic film from plain plastic film amounts to manufacture, and whether Cenvat credit on inputs and capital goods used in that process is admissible.

Analysis: The process was held to fall within the amended regime under Chapter Note 16 to Chapter 39 of the Central Excise Tariff Act, 1985. The Tribunal relied on earlier coordinate Bench decisions which, on similar facts, distinguished the earlier Supreme Court ruling on metallization and held that the process brings into existence a new product. It was also noted that the later decision in Dhruv Industries had been affirmed by the Supreme Court. Once the activity is treated as manufacture, the inputs and capital goods used in the process do not lose credit eligibility merely because the intermediate product is cleared or used in the manufacture of dutiable final goods.

Conclusion: The process amounts to manufacture and the denied Cenvat credit is admissible. The appeal succeeds in favour of the assessee.

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