CESTAT Chennai remands duty exemption case for 100% EOU goods to verify manufacturing activities

CESTAT Chennai set aside the adjudicating authority's order regarding exemption from duty under N/N. 22/2003 for goods cleared to 100% EOU during June-September 2010. The tribunal found insufficient clarity on whether procured goods were entirely re-packed and re-labelled, which would constitute manufacture. Since the issue was previously considered favorably for several consignments in appellant's case, the matter was remanded to verify appellant's contention that their activities amount to manufacture. Appeal allowed by way of remand.

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Issues:
The issues involved in the judgment are whether the appellant is eligible for exemption from payment of duty when clearing goods to 100% EOUs, and whether the activity of repacking and re-labeling amounts to "manufacture" under the Central Excise Act, 1944.

Exemption Eligibility Issue:
The appellant held Central Excise Registration for manufacturing Mono-sodium Glutamate (MSG) and availed CENVAT Credit on inputs. The Department contended that to be eligible for duty exemption when clearing goods to 100% EOUs, inputs should be used to manufacture finished goods at the factory. A Show Cause Notice was issued for duty demand on inputs cleared to EOUs. The original authority confirmed duty demand, which was upheld by the Commissioner (Appeals). The appellant argued that repacking and re-labeling constitute manufacture, citing a previous favorable decision. The Tribunal remanded the matter to verify if goods were cleared as such and directed consideration of the manufacturing contention.

Manufacture Activity Issue:
The appellant claimed that re-packing and re-labelling the inputs before clearing to EOUs amounts to "manufacture." The Department argued that the appellant cleared inputs as such, making them ineligible for duty exemption. The Tribunal noted inconsistencies in the appellant's activities and remanded the matter for verification and consideration of the manufacturing claim. The impugned order was set aside, and the appeal was allowed by way of remand for further adjudication based on the manufacturing contention and previous favorable decisions.

Separate Judgment:
The judgment was delivered by Hon'ble Mrs. Sulekha Beevi C.S., Member (Judicial), and Hon'ble Mr. Vasa Seshagiri Rao, Member (Technical).

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