By TIOL News Service

MUMBAI, JAN 13, 2016: DURING the period June 2003 to June 2004 appellant had sent raw materials on payment of duty to the job worker for the manufacture of the product para cumidine . The job worker after manufacture sent back para cumidine to the appellant on payment of duty. After process inspection, removal of moisture, quality test and repackaging, the said product is cleared from factory on payment of appropriate duty.

The department is of the view that the said product cleared by the appellant from the factory premises is clearance of inputs as such and they are, therefore, required to reverse the CENVAT credit availed on the said product received from the job worker.

The SCN was confirmed by the adjudicating authority along with penalty and interest and was upheld by the Commissioner (A).

The appellant filed an appeal before the CESTAT in the year 2005.

The appeal was heard recently.

It is submitted that in view of Chapter note 10 to Chapter 29 the process conducted by them on the product received from the job worker tantamount to manufacture u/s 2(f) of the CEA, 1944 and, therefore, they had paid duty on the basis of the transaction value when cleared from the factory. Inasmuch as it was not a case of removal of inputs "as such". Reliance is placed on the Tribunal decisions in Thermax Ltd. 2014-TIOL-1832-CESTAT-AHM & the majority decision in Jindal Drugs Ltd. 2015-TIOL-857-CESTAT-MUM.

The AR rebutted the submission of the appellant by informing the Bench that many times the appellant removed the said product at prices lower than the amount paid by him to the job worker; that the activity allegedly undertaken by the appellant will not fall under the mischief of note no. 10 to chapter 29 as appellant is not doing any packing or repacking or rendering any other treatment to make the said product marketable. The judgment of the Kolkata Tribunal in the case of TRF Ltd. is adverted to.

The Bench after considering the submissions inter alia observed -

"10. The case in hand as already reproduced herein above, the said product is undergoing the process of removal of moisture is not in dispute. In our considered view, removal of moisture is also a process, as a customer purchases said product from the appellant needs to have specification of non-existence of moisture in the final products for his consumption. Removal of moisture is a process which may be done by traditional method of exposure to heat by spreading the said products in the sunlight or in dryers. Be that as it may, removal of moisture is a process that would render the product marketable to their customers cannot be disputed.

11. It is also further to be noted removal of moisture from said product, appellant has to empty from the containers which was received from the job workers, and after removal of moisture, quality test, repack them in new containers and label the said product as their own products, which activity falls within ambit of chapter note no. 10 of the chapter 29 and we have to hold that the said product is manufactured by the appellant, it can be seen that the CENVAT credit was correctly availed by the appellant, the duty liability is discharged on the transaction value is correct. To our mind the case of revenue treating the said product as removal of inputs as such, is misconceived."

The CESTAT found support in the majority decision delivered in the case of Jindal Drugs Ltd. (supra) and distinguished the case law cited by the AR by observing that the facts are different inasmuch as in that case only an inspection was done with repacking and hence it was held therein that it is not amounting to manufacture.

Holding that the impugned order is unsustainable, the same was set aside and the appeal was allowed with consequential relief.

(See 2016-TIOL-142-CESTAT-MUM)