CX- s. 2(f) - Applicant importing Polymer by classifying under Ch. 39 and taking CENVAT - after repacking, same is cleared under Ch. 38 on payment of duty on Transaction value - activity cannot be considered as manufacture as no such chapter note exists in Ch.39: CESTAT
By TIOL News Service
MUMBAI, NOV 14, 2013: THE applicants are engaged in the manufacture of lubricants and chemical additives and the raw material for the same is polymer. The applicants are importing polymer on payment of appropriate duties. Certain quantities of duty paid imported polymer were cleared,after re-working and repacking,on payment of duty on the transaction value.
Revenue says this is wrong inasmuch as since the applicants were clearing the duty paid imported polymer as such, the applicants are liable to reverse the credit availed in respect of such polymer as per the provisions of Rule 3(5) of the CENVAT Credit Rules, 2004.
Consequently, a demand of Rs.1,16,95,872/- came to be confirmed by the CCE, Belapur along with interest and penalties.
Before the CESTAT with a Stay application, the applicant submits that the demand notice dated 06/03/2012 is time barred as the same covers the period February 2007 to October 2011.It is further submitted that the applicants were regularly filing statutory monthly returns showing taking of credit as well as payment of duty hence the allegation of suppression with intent evade payment of duty is not sustainable and on this issue the adjudicating authority had not given any findings. Furthermore, the demand for the normal period comes to approximately Rs.25 lakhs.
The Revenue representative submitted that the applicants are importing the polymer by classifying the same under Chapter 39 and after repacking, the applicants were clearing the same by re-classifying under Chapter 38 of the Central Excise Tariff just to take advantage of Chapter Note 10 of Chapter 38 of the Tariff whereby the activity of packing and repacking of the goods classifiable under the Chapter amounts to manufacture. On the plea of limitation taken by the applicant, the Revenue submitted that the applicants never disclosed to the Revenue that they were clearing the "CENVATTED inputs as such"and rather the applicants in their declaration have shown their final products as lubricants and chemical additives and on which they were paying duty and this was a clear case of suppression.
The Bench observed -
"8. We find that the admitted facts of the case are that the applicants are importing polymer by classifying the same under Chapter 39 of the Customs Tariff and the same is being cleared as such after repacking. There is no chapter note under Chapter 39 of the Central Excise Tariff to show that repacking amounts to manufacture. The applicants while clearing polymer as such, reclassified the same under Chapter 38 of the Central Excise Tariff. As the applicants are clearing the imported duty paid polymer on which credit has been availed as such, therefore the applicants are liable to reverse the credit availed in respect of polymer. In respect of limitation, we find that the applicants never disclosed to the Revenue regarding their activity that they are clearing polymer as such rather the applicants have shown in their declaration as chemical additives. The applicants are receiving polymer in metal crates and the polymer is debulkedfrom metal crates into bags and the polymer bags are cleaned, repacked and relabelled. We find that this activity cannot be considered as amounting to manufacture as per the provisions of Section 2(f) of the Central Excise Act…."
Holding that the applicants had not made out a case for total waiver of duty, they were directed to deposit an amount equal to 50% of the duty confirmed after considering their plea of financial hardship, for obtaining a Stay.
In passing: See also 2012-TIOL-826-CESTAT-MUM & 2012-TIOL-614-CESTAT-MUM. Incidentally, in these cases, the duty paid by treating the repacking activity as "manufacture" was more than the CENVAT demand.
(See 2013-TIOL-1704-CESTAT-MUM)
