2023 (11) TMI 1068 - AT - Central Excise

Manufacturing electronic capacitor film from plastic materials qualifies for CENVAT credit under Chapter 3920 2090

Amit Capacitors Ltd. Versus Commissioner of Central Tax, Hyderabad - IV

CESTAT Hyderabad allowed the appeal regarding disallowance of CENVAT credit on inputs and capital goods used in manufacturing electronic capacitor grade ... Disallowance of CENVAT Credit - inputs and capital goods - process of making electronic capacitor grade metalized dielectric plastic film (MPP film), falling under Chapter 3920 2090 of the CETA, 1985, amounts to manufacture or not - HELD THAT:- The issue whether the process of making MPP film amounts to manufacture or not is no longer res integra - under similar facts and circumstances, the Coordinate Bench of this Tribunal at Mumbai in the case of Paper Products Ltd., vs CCE, Mumbai [2014 (3) TMI 521 - CESTAT MUMBAI] have distinguished the ruling of Hon’ble Supreme Court in the case of Metalex India Pvt Ltd., vs CCE [2004 (2) TMI 387 - SUPREME COURT] and have held that under similar facts and circumstances, the process amounts to manufacture. It is further found that Coordinate Bench in Chandigarh in the case of Dhruv Industries Ltd., vs CCE, Delhi-III [2018 (4) TMI 1492 - CESTAT CHANDIGARH] have also, under similar facts and circumstances, distinguished the ruling of Metalex 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. Thus, the process of making MPP Films, capacitor grade from plain plastic film would amount to manufacturing process during the relevant period and the MPP, classifiable under CETH 3920 2090 would still be a manufactured good under Section 2(f), irrespective of absence of any chapter note specifically declaring the said activity as a manufacturing activity. Once the process is considered as manufacturing process, the credit becomes admissible. The Appellant is entitled to Cenvat credit - appeal allowed. Issues involved: The issue involved in this Appeal is whether Cenvat credit on inputs and capital goods, totalling Rs.1,30,90,108/-, has been rightly disallowed for the period April 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 to manufacture.Details of the Judgment:Manufacture of MPP Film: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, leading to denial of credit on inputs and capital goods by the Ld. Commissioner. The Appellant argued that the process of metallization amounts to manufacture, citing previous cases and the belief that metallization amounts to manufacture. The Appellant relied on various decisions and technical clarifications to support their argument that the process of making MPP film should be considered a manufacturing process.Cenvat Credit and Duty Payment:The Appellant also argued that even if the process is not considered manufacturing, they have undertaken manufacturing activity and discharged excise duty on the cleared MPP Films. They cited legal precedents to support their claim that credit cannot be denied in such circumstances. The Appellant further contended that the capital goods on which credit is availed are used for manufacturing MPP, which is then used for dutiable capacitors, making them eligible for credit under Rule 6(4) of Cenvat Rules.Legal Precedents and Deemed Manufacturing Status:The Tribunal considered previous cases where similar processes were deemed to be manufacturing activities, despite initial denials. The Tribunal distinguished the ruling of the Hon'ble Supreme Court in a specific case and held that the process of making MPP Films amounts to manufacture. The reliance on Chapter Note 16 to Chapter 39, creating a deemed manufacturing status for metallization, was deemed incorrect as the process itself could be considered a manufacturing process under Section 2(f) of the Central Excise Act, making the Appellant entitled to Cenvat credit.Conclusion:In conclusion, the Tribunal held that the process of making MPP Films from plain plastic film amounts to a manufacturing process during the relevant period. The Appellant was found entitled to Cenvat credit that was disallowed by the Impugned Order. Therefore, the Appeal was allowed, the Impugned Order was set aside, and the Appellant was granted consequential benefits in accordance with the law.