CX - Conversion of retail packs of paints into bigger/bulk packs does not amount to manufacture as no evidence has been adduced to indicate that the appellant has undertaken any reprocessing - Appeal allowed: CESTAT
By TIOL News Service
MUMBAI, MAY 06, 2014: THE appellant is a job worker of M/s Asian Paints (I) Ltd. On the direction of M/s Asian Paints, the appellant has, in the months of January and February, 2002, received retail packs of paints for conversion into bigger packs. The applicant did the repacking from small packs to bigger packs and cleared the same without payment of any duty. Incidentally, no CENVAT credit was availed on any materials/inputs while conducting the said repacking activity.
The Revenue was of the view that the reprocessing activity amounts to "manufacture" of final products and hence demanded CE duty on these clearances. As the lower authorities confirmed the duty demand and imposed penalty/interest the appellant is before the CESTAT.
The issue involved in the second appeal is that certain CENVATTED inputs were destroyed in floods and the same were cleared by the appellant on payment of duty on transaction value. Revenue wants the appellant to reverse the entire credit availed and so confirmed the differential duty and imposed penalty and interest.
In the matter of the first appeal, the appellant submitted that as per the direction of the principal manufacturer i.e. M/s Asian Paints, they did only repacking of the goods from 'retail to bulk packing' and they have not done any reprocessing of the goods. The activity of repacking of duty paid finished paints from retail into bulk packs does not amount to manufacture, therefore, they are not liable to pay duty. It is further contended that they have not taken any CENVAT credit on the invoice issued by the M/s Asian Pains for re-packing. The whole case of the Revenue is based on an inter-office memo written by M/s Asian Paints dated 18.01.2002 wherein it has been stated that the goods were sent to the appellant for reprocessing. It is submitted that the person who has written this letter did not know the difference between re-packing and re-processing under the excise law. Moreover, the appellant is not having any facility for reprocessing but they have facilities only for repacking. Since no evidence has been produced by the Revenue that the appellant has done reprocessing, the demand is not sustainable, submitted the appellant.
The Revenue representative reiterated the orders of the lower authority.
The CESTAT observed -
++ The appellant received the goods from their principal manufacturer for only repacking of the paints from retail packs to bulk packs. There is no evidence on record that the appellant has reprocessed the goods and is having any facility at their unit for reprocessing of the same. In the absence of any evidence, merely on the basis of words "sent for reprocessing" it cannot be concluded that the appellant has undertaken the reprocessing of the goods. Therefore, it is held that the appellant has done only the repacking from retail packs to bulk packs of the impugned goods which does not amounts to manufacture during the impugned period. Therefore, the demand of duty is not sustainable - consequently, penalty is also not sustainable.
++ As inputs were destroyed in flood and have not gone into manufacturing, therefore, the appellants are required to reverse the credit taken thereon. The fact is that the appellant has paid duty on the transaction value. The appellant is directed to reverse the entire amount of credit taken on the inputs destroyed in floods. As there is no malafide intention of the appellant for taking credit on inputs destroyed in flood, therefore, no penalty is warranted.
The appeals were disposed of.
(See 2014-TIOL-706-CESTAT-MUM )
