2024 (3) TMI 226 - AT - Central Excise

Packing and labeling activities qualify for CENVAT credit if excise duty discharged during valid registration period

The appellant engaged in packing/repacking and labeling/relabeling activities and discharged Central Excise duty on products during the disputed period ... CENVAT Credit of CVD paid on the import of goods and using the same for discharging excise duty on the products cleared after undertaking the activity of packing/repacking, labeling/relabeling - process amounting to manufacture or not - HELD THAT:- The appellant has discharged Central Excise duty on the products during the disputed period. For this reason, the department cannot disallow credit alleging that the activity does not amount to ‘manufacture’ - reliance placed in the decision of the Tribunal in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES [2012 (7) TMI 141 - BOMBAY HIGH COURT] and M/S. LUK INDIA PRIVATE LIMITED VERSUS THE COMMISSIONER OF GST & CENTRAL EXCISE, SALEM [2024 (2) TMI 1018 - CESTAT CHENNAI]. Revenue has argued that the department has revoked Central Excise Registration issued to the appellant and therefore the activity has to be held as not amounting to ‘manufacture’. On perusal of the dates, it is seen that the registration has been revoked only after the disputed period. The appellant was holding Central Excise registration for the disputed period which is from 1.2.2013 to 1.1.2014. The disallowance of credit is not justified. The impugned order is set aside - Appeal is allowed. Issues Involved:1. Whether the activity of packing/repacking, labeling/relabeling amounts to 'manufacture' under Section 2f (iii) of the Central Excise Act, 1944.2. Whether the disallowance of cenvat credit on the basis that the activity does not amount to 'manufacture' is legal and proper.Summary:Issue 1: Whether the activity of packing/repacking, labeling/relabeling amounts to 'manufacture' under Section 2f (iii) of the Central Excise Act, 1944.The appellants, importers of various appliances, claimed that their activities of packing/repacking, labeling/relabeling after importing goods constituted 'manufacture' under Section 2f (iii) of the Central Excise Act, 1944. They availed cenvat credit on the Countervailing Duty (CVD) paid at import and used it to discharge excise duty on the repacked/relabelled goods. The department, however, contended that these activities did not amount to 'manufacture' and issued a show cause notice to deny the credit and demand repayment with interest and penalties. The Tribunal, referencing the case of Ajinkya Enterprises VS CCE Pune, held that since the appellant had paid excise duty on the goods, the activities should be considered as 'manufacture'. The Tribunal also cited similar decisions in the cases of Luk India Private Ltd. and Domino Printech India Pvt. Ltd., reinforcing that duty paid on final products validates the credit availed on inputs even if the activity does not amount to manufacture.Issue 2: Whether the disallowance of cenvat credit on the basis that the activity does not amount to 'manufacture' is legal and proper.The department argued that the disallowance of credit and the confirmation of demand were justified as the appellant's activities did not constitute 'manufacture'. They also mentioned that the appellant's Central Excise Registration was revoked. However, the Tribunal noted that the registration revocation occurred after the disputed period, during which the appellant held valid registration. The Tribunal concluded that the department cannot disallow credit when excise duty has been paid on the products, following the principle established in multiple precedents, including Ajinkya Enterprises and R K Packaging. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential reliefs.Conclusion:The Tribunal ruled that the appellant's activities of packing/repacking, labeling/relabeling amounted to 'manufacture' for the purposes of availing cenvat credit, and disallowance of the credit by the department was not justified. The appeal was allowed with consequential reliefs.