2023 (11) TMI 253 - AT - Central Excise

CENVAT credit allowed for electronic capacitor grade metalized plastic film production as process constitutes manufacture under Chapter 3920 2090

CESTAT Hyderabad allowed the appeal concerning CENVAT credit denial for electronic capacitor grade metalized dielectric plastic film (MPP film) ... CENVAT Credit - denial on the ground that activity of the Appellant i.e., the process of making electronic capacitor grade metalized dielectric plastic film (MPP film), falling under Chapter 3920 2090 of the CETA, 1985, does not amount of manufacture - HELD THAT:- The issue whether the process of making MPP film amounts to manufacture or not is no longer res integra as amendment to the CETA, wherein, in Chapter Note 16 to Chapter 39, was added - under similar facts and circumstances, the Coordinate Bench of this Tribunal at Mumbai in the case of THE PAPER PRODUCTS LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [2014 (3) TMI 521 - CESTAT MUMBAI] have distinguished the ruling of Hon’ble Supreme Court in the case of METLEX (I) PVT. LTD. VERSUS COMMISSIONER OF C. EX., NEW DELHI [2004 (2) TMI 387 - SUPREME COURT] and have held that under similar facts and circumstances, the process amounts to manufacture. The Coordinate Bench in Chandigarh in the case of DHRUV INDUSTRIES LTD. VERSUS CCE, DELHI-III (VICE-VERSA) [2018 (4) TMI 1492 - CESTAT CHANDIGARH] have also, under similar facts and circumstances, distinguished the ruling of Metalex (supra) and held that a new product comes into existence by use of the various raw materials viz., Poly Propylene, Polyester Films of Aluminium & Zinc, which is coated and further the process required use of capital goods/ machinery involving substantial cost and such process of manufacture takes about 36 hours. It was held that a new product comes into existence. The process of making MPP Films, capacitor grade from plain plastic film would amount to manufacturing process and the MPP classifiable under CETH 3920 2090 would be a manufactured good. Once the process is considered as manufacturing process, the credit becomes admissible. Accordingly, Appellant is entitled to Cenvat credit, which has been disallowed by the Impugned Order. Appeal allowed. Issues involved:The issue involved in this Appeal is whether Cenvat credit on inputs and capital goods totalling Rs.5,27,19,623/- has been rightly disallowed for the period March 2005 to February 2006, on the ground that the activity of the Appellant i.e., the process of making electronic capacitor grade metalized dielectric plastic film (MPP film), falling under Chapter 3920 2090 of the CETA, 1985, does not amount of manufacture.Judgment Details:1. Issue of Manufacturing Process:The Appellant is engaged in the manufacture of capacitors and Electronic Capacitor Grade Metallized Dielectric Plastic Film (MPP Film). The department contended that the process of making MPP from plastic film does not amount to manufacture. The Ld. Commissioner denied the credit on inputs and capital goods on this ground, citing a previous Supreme Court decision. The Appellant argued that the metallization process does amount to manufacture and paid duty accordingly. They cited various judgments and technical clarifications to support their position. The Tribunal found that the process of making MPP Films amounts to a manufacturing process, as clarified by an amendment to the CETA and previous Tribunal decisions. Therefore, the Appellant is entitled to Cenvat credit, which was wrongly disallowed.2. Denial of Cenvat Credit:The Appellant also argued that even if the MPP Films were cleared to DTA on payment of duty, they have undertaken manufacturing activity, and credit cannot be denied as the output excise duty was discharged. They relied on precedents to support their claim. The Tribunal agreed that the Appellant's manufacturing activity justifies the credit availed, and the denial of credit on inputs used for final dutiable products is not sustainable. Therefore, the Appeal was allowed, and the Appellant is entitled to consequential benefits.3. Capital Goods Credit:The Appellant contended that credit on capital goods used for manufacturing intermediary products consumed in the production of dutiable goods should not be denied. They cited relevant decisions to support their argument. The Tribunal agreed that the Appellant is eligible for credit on capital goods used in the manufacturing process, and the denial of credit on the ground of manufacturing non-excisable goods was unfounded. The Appellant's claim for credit on capital goods was upheld.4. Stock of Goods and Exports:The Appellant also raised issues regarding stock of goods, export of MPP Films, and the denial of credit on inputs used for export. They argued that they have paid duty on exports and claimed rebate, entitling them to credit. The Tribunal found that once the rebate order is sanctioned and refunded, the Appellant is entitled to credit on inputs used for export. The denial of credit on the grounds of process not amounting to manufacture was deemed unsustainable. The Appellant's claim for credit on inputs used for export was upheld.Conclusion:The Tribunal found in favor of the Appellant on all issues, holding that the process of making MPP Films amounts to a manufacturing process. Therefore, the Appellant is entitled to Cenvat credit wrongly disallowed by the Impugned Order. The Appeal was allowed, and the Impugned Order was set aside, granting the Appellant consequential benefits in accordance with the law.