M/S. Packotech Industries vs Cce, Rohtak

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI

Date of Hearing/ Decision:23.10.2015

Excise Appeal No. E/3186/2012-EX(DB)

[Arising out of common Order-in-Original No.14/CE/COmmr/BKJ.RTK/2012 dated 23.07.2012 passed by the Commissioner of Central Excise, New Delhi]

M/s. Packotech Industries .Appellants

Vs.

CCE, Rohtak Respondent

Appearance:

Rep. by Shri Ashwini Sharma, Advocate for the appellants.

Rep. by Shri R.K. Mishra, DR for the Department.

For approval and signature:

Honble Smt.Sulekha Beevi C.S. , Member (Judicial)

Honble Shri B. Ravichandran, Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

Coram: Honble Smt. Sulekha Beevi C.S., Member (Judicial)

Honble Shri B. Ravichandran, Member (Technical)

Final Order No.53333/2015 dated:23.10.2015

Per B. RAVICHANDRAN:

The appellant is engaged in the manufacture of flexible laminated film and flexible metalized film. They were availing cenvat credit on the raw materials mainly polyester film and used the credit for payment of duty on the final products. After certain verification, the Revenue entertained a view that the process undertaken by the appellant does not amount to manufacture and as such, the cenvat credit availed by them is recoverable under Rule 14 of the Cenvat Credit Rules, 2004. Accordingly, proceedings were initiated by issuing notice dated 29.08.2011 which resulted in the order dated 23.07.2012. By this order, the ld. Commissioner confirmed the demand of cenvat credit availed by the appellant during the period 2006-2007 and 2007-2008 and imposed equal penalty under Rule 15 of Cenvat Credit Rules and also further penalty under Rule 26(2) and 27 of Central Excise Rules, 2002. Aggrieved by this order, the appellant is before us.

2. Ld. Counsel, Shri Ashwani Sharma summarized the appellants plea as below:-

(a) The process undertaken by the appellant amounts to manufacture. They procure duty paid polyester film which is subjected to the process of printing with the help of printing cylinders. Thereafter, printed polyester film is first laminated with the metalized film with the help of adhesives/hardner and solvent and it is again laminated with the poly film produced in the factory. The product is cleared on payment of duty. The final product has got separate commercial identity in the trade and it is totally different in use when compared to the input. The ld. Counsel for the appellant relied on the decision of the Honble Supreme Court in the case of Laminated Packings (P) Ltd. Vs. CCE -1990 (49) ELT 327 (SC). He submitted that the Honble Supreme Courts decision in the case of Metlex (I) Pvt. Ltd.  2004 (165) ELT 129 (SC) is not applicable to the facts of their case. In the Metlex (I) Pvt. Ltd. (supra), the process involved is lamination/metallization of the film, whereas the appellant is undertaking a number of steps in making the final product and lamination is only one such step. Further, in the Metlex (I) Pvt. Ltd. (supra), the assessee contended that the process undertaken by them does not amount to manufacture and the Honble Apex Court held in assessees favour mainly on the ground that the Department failed to discharge the burden of proving that the process undertaken by the assessee amounts to manufacture. In the present case, ld. Counsel submits that it is the appellants case that the process undertaken by them amounts to manufacture because of the various processes involved and resultant product being entirely different in use and quality.

(b) Ld. Counsel for the appellant further relies on the Tribunals decision in the case of Metlex (I) Pvt. Ltd.  2008 (232) ELT 479 (Tribunal-Delhi) and Markwell Paper Plast Pvt. Ltd. Vs. CCE, Noida  2010 (262) ELT 579 (Tribunal-Delhi).

(c) Ld. Counsel further submitted that even if it is assumed that the process undertaken by them does not amount to manufacture it is a fact that they have paid duty on the final products which is much higher than the credit taken on inputs. The credit taken on inputs have been used towards such payment. In such situation, there is no question of recovering the input credit again. For this, the appellant relied on the decisions of the Tribunal/courts in various cases as below:-

(1) Commissioner of Central Excise & Customs,Vadorara Vs. Narmada Chemtur Pharmaceuticals Ltd.[2005 (179)ELT 276 (SC)]

(2) Bhushan Steel Ltd. Vs. Central Excise, Ghaziabad [2014 (299) ELT 254 (Tribunal-Delhi)]

(3) Commissioner of Central Excise, J&K, Jammu Vs. North Sun Enterprises Industrial Estate [2012 (284) ELT 75 (Tribunal-Delhi)

(4) Anutone Acoustics Ltd. Vs. CCE, Thane-I[2013(298) ELT 246 (Tribunal-Mumbai)

(5) Foam Techniques Mfg. (I)Pvt. Ltd. CCE, Thane-I[2015 (317) ELT 266 (Tribunal-Mumbai)]

(6) RAS Polytex Pvt. Ltd. Vs. CCE & ST, Bhopal [2013 (290) ELT 244 (Tribunal-Delhi).

(7) Asian Colour Coated Ispat Ltd. Vs. CCE, Delhi-II[2015(317) ELT 538 (Tribunal-Delhi).

3. Ld. Authorised Representative , Shri R.K. Mishra reiterated the findings of the Original Authority and stated that the decisions of the Tribunal in Anutone Acoustics Ltd.(supra) is in appeal by the Revenue in the Honble Bombay High Court. Similarly, another decision of the Tribunal in the case of Heat Shrink Technologies Ltd. - 2007 (220) ELT 437 (Tribunal-Mumbai) involving similar issue is also in appeal with the same High Court. He reiterated that the Original Authoritys finding following the decision of the Apex Court in Metelex (I) Pvt. Ltd. case cannot be faulted.

4. We have heard both the sides and examined the appeal records.The point for decision is whether or not the process undertaken by the appellant amounts to manufacture for central excise purpose and if not, the utilized ineligible credit for the payment of final product can be subjected to recovery again. The Original Authority relied on the decision of the Honble Supreme Court in Metelex (I) Pvt. Ltd. (supra), more specifically, para-15 of the said order, to hold that the process undertaken by the appellant does not amount to manufacture. He also held that Chapter Note-16 of Chapter 39 of CET was added w.e.f. 1.3.2008 and as such, the process does not amount to manufacture prior to 1.3.2008. He concluded that no new distinct product comes into existent as a result of lamination of duty paid plastic film. We find that the Original Authority has not fully examined the various stages of conversion of raw materials to the final products by the appellant. As explained earlier in this order, the appellant undertakes printing first, then lamination with metalized film and again lamination with poly film produced in the factory.

The appellant have explained in detail the trade usage of their final product along with the technical specifications like OTR (Oxygen Transmission Rate) and MVTR(Moisture Vapour Transmission Rate) and the specific usage of final product for which, admittedly, input  poly film cannot be used. It is clear that the final product cleared by the appellant are having distinct commercial name and utility, which cannot be fulfilled by the poly film which is their input. It is also clear that the process undertaken by them is not mere lamination or metallization. The Original Authority proceeded on such premise and relied on the Honble Supreme Courts order in Metelex (I) Ltd. (supra). We find that the appellants case is more appropriately covered by the decision of Honble Supreme Court in Laminated Packings Pvt. Ltd. (Supra). The Honble Supreme Court held that the raw materials and final product falling under the same Tariff Entry is of no consequence as long as the goods are having a distinct, separate and identifiable function in the market. We find that the Tribunal in the case of Paper Products Ltd. (supra) and Markwell Paper Plast Pvt. Ltd. reported in 2012 (285) ELT 76 (Tribunal-Delhi) and many other similar cases held that the process of laminating /metalizing of duty paid film used for packaging purposes is to be treated as manufacture as per Section 2(f) of the Central Excise Act, 1944. Further, it is relevant to note that the Honble Apex Courts decision in the case of Metlax (I) Pvt. Ltd. (supra) was mainly on the ground that the Department had failed to discharge their burden of proving that the process undertaken by the assessee amounts to manufacture.

We find that the Tribunal in various subsequent cases, as mentioned above, distinguished the application of the said order of the Honble Apex Court on analysis of the facts. Accordingly, we find that the original authority has erred in not analyzing all the relevant facts involved in the present case. As such, we find that the assessee has followed the cenvat credit scheme as applicable to them in the manufacture of their final products. The demand is not sustainable on this ground.

5. We also find much force in the appellants contention regarding unsustainability of demand to recover the input credit as the said credit has been utilized by them for payment of duty on the final product. Even in case the process is not amounting to manufacture, as the input credit stands reversed during the course of payment of duty on final products, no further demand for such reversed credit is sustainable. Such view draws support from various decisions of this Tribunal relied and quoted by the appellant and mentioned supra.

6. In view of the discussion and findings as above, we set aside the impugned order and allow the appeal.

[Operative part of the order pronounced in the open Court]

( Sulekha Beevi C.S. )

Member (Judicial)

( B. Ravichandran)

Member (Technical)

Ckp.

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