Custom, Excise & Service Tax Tribunal
B S H Household Appliances ... vs The Principal Commissioner Of Central ... on 4 March, 2024
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Excise Appeal No.42147 of 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL,
SOUTH ZONAL BENCH, CHENNAI
COURT HALL No. III
EXCISE APPEAL No.42147 OF 2014
(Arising out of Order-in-Original No.18/2014 dated 10.06.2014 passed by
Commissioner of Central Excise, Adjudication: Chennai II Commissionerate, 692,
Anna Salai, M.H.U. Complex, Nandanam, Chennai 600 035)
M/s.BSH Household Appliances
Manufacturing Pvt. Ltd. .... Appellant
Survey No.55/2, 55/4, 55/1,
Tiruvallur Road, Puchi Athipedu Village,
Thiruvallur 600 052.
Versus
The Commissioner of GST & Central Excise, ...Respondent
Chennai Outer Commissionerate
Newry Towers, No.2054, I Block, II Avenue,
12th Main Road, Anna Nagar,
Chennai 600 040.
APPEARANCE :
Mr. Raghav Rajeev, Advocate
For the Appellant
Mr. R. Rajaraman, Assistant Commissioner (A.R)
For the Respondent
CORAM :
HON'BLE MS. SULEKHA BEEVI.C.S., MEMBER (JUDICIAL)
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
DATE OF HEARING : 04.03.2024
DATE OF DECISION : 04.03.2024
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Excise Appeal No.42147 of 2014
FINAL ORDER No.40224/2024
ORDER :[Per Ms. Sulekha Beevi. C.S ] Brief facts are that the appellants are importers of refrigerators, freezers, household or laundry type washing machine, dishwashing machines etc. falling under Chapter 84 & 85 of CETA 1985 They applied for Central Excise Registration claiming to be manufacturer of the above goods on 13.02.2005. The appellant claimed that the they were undertaking packing/repacking, labelling/relabeling of the goods after clearance of the goods from Custom House. The appellant availed cenvat credit of CVD paid by them 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. The department was of the view that the said activity did not amount to 'manufacture' as per Section 2f (iii) of the Central Excise Act, 1944. Accordingly, show cause notice dt. 6.3.2014 was issued to the appellant proposing to deny the credit availed by them and to demand the same along with interest and for imposing penalty. After due process of law, the original authority disallowed the credit, confirmed the demand, interest and imposed penalty. Aggrieved by such order, the appellant is now before the Tribunal.
2. Ld. Counsel Shri Raghav Rajeev appeared and argued on behalf of the appellant. It is submitted that during the disputed period, the appellant had imported various appliances from BSFIM Germany. The said packages are imported with the pre-affixed 3 Excise Appeal No.42147 of 2014 label mentioning the Maximum Retail Price (M.R.P). On receipt of the goods by the unit, the appellant paid the Countervailing duty (CVD) and availed cenvat credit of such duty. The goods imported were stored in the appellant's warehouse. To transport the goods to the warehouse, they engaged a logistics service provider for transportation. During transportation, some of the packages, labels and M.R.P. stickers got damaged and the appellant had to repack and relabelled with revised M.R.P before sale to the customers. Since the said goods are specified under III Schedule, the appellant entertained a view that the activity of packing / repacking, labelling / relabelling amounted to 'manufacture' in terms of Section 2f (iii) Central Excise Act, 1994. The appellant thus discharged Excise Duty on the products cleared from their warehouse. The appellant utilized the cenvat credit for liability on such goods. The present show cause notice has been issued alleging that the activity of packing / repacking, labelling / relabelling done by the appellant after the import of the goods does not amount to 'manufacture'. It is submitted that the appellant having discharged Central Excise duty, the department cannot deny the credit alleging that the activity does not amount to 'manufacture'.
3. Further that the entire exercise is revenue-neutral as the appellant has discharged Excise Duty on the products on which the credit has been utilized. To support his argument, the counsel relied upon the decision in the case of Ajinkya Enterprises VS CCE Pune - 2013 (288) ELT 247 (Tri.-Mumbai). It is submitted that the said case the Tribunal held that the department cannot deny the credit alleging that the activity does not amount to 'manufacture'. The 4 Excise Appeal No.42147 of 2014 said decision was upheld by the Hon'ble High Court of Bombay reported in 2013 (294) ELT 203 (Bom.).
4. The Tribunal in the recent decision in the case of Luk India Private Ltd. Vs CGST & Central Excise, Salem - 2024 (2) TMI 1018- CESTAT CHENNAI had occasion to consider the similar issue and following the decision in the case of Ajinkya Enterprises as well as other decisions to hold that the department cannot deny the credit alleging that the activity does not amount to 'manufacture' when they have already collected the duty on the products. The Ld. Counsel prayed that the appeal may be allowed.
5. Ld. A.R Sri R. Rajaraman appeared and argued for the Department. Ld.A.R vehemently argued that the activity does not amount to 'manufacture' and therefore disallowance of credit and the confirmation of demand is legal and proper. It is submitted that the department had issued a show cause notice dt. 6.3.2014 proposing to revoke the Central Excise Registration issued to the appellant on 13.2.2013. The original authority has revoked the registration vide order issued on 09.06.2014. It is prayed that the appeal may be dismissed.
6. Heard both sides.
7. The issue is whether the disallowance of cenvat credit alleging that the activity does not amount to 'manufacture' is legal and proper. The case of the department is that the activity undertaken by the appellant after import of the goods in the nature of packing / repacking, labelling / relabelling does not amount to 'manufacture'. We have to say that the appellant has discharged 5 Excise Appeal No.42147 of 2014 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' . We draw support from the decision of the Tribunal in the case of Ajinkya Enterprises (supra) and Luk India Private Ltd. (supra). The relevant part of the decision of M/s.Luk India Private Ltd. is reproduced as under :
"3.2 The issue is only with regard to the eligibility of credit availed on the goods cleared from Unit 1 to Unit 2. It is an undisputedfact that the appellant has cleared all goods from unit 2 by payment of duty. When the department has collected duty on the finished products, the credit availed on the inputs cannot be deniedalleging that the activity does not amount to manufacture. This issue is settled by the decisions in the case of Ajinkya Enterprises (supra) wherein the Hon'ble High Court of Bombay held as under.
"10. Apart from the above, in the present case, the assessment on decoiled HR/CR coils cleared from the factoryof the assessee on payment of duty has neither been reversed nor it is held that the assessee is entitled to refund of duty paid at the time of clearing the decoiled HR/CR coils. In these circumstances, the CESTAT following its decision in the case of Ashok Enterprises - 2008 (221) E.L.T. 586 (T), Super Forgings - 2007 (217) E.L.T.559 (T), S.A.I.L. - 2007 (220) E.L.T. 520 (T) = 2009 (15) S.T.R.640 (Tribunal), M.P. Telelinks Limited - 2004 (178) E.L.T. 167(T) and a decision of the Gujarat High Court in the case of CCE Vs. Creative Enterprises reported in 2009 (235) E.L.T. 785 (Guj.) has held that once the duty on final products has been accepted by the department.CENVAT credit availed need not be reversed even if theactivity does not amount to manufacture. Admittedly, similarview taken by the Gujarat High Court in the case of Creative Enterprises has been upheld by the Apex Court [see 2009 (243) E.L.T. A 121] by dismissing the SLP filed by the Revenue."
3.3 The Tribunal in the case of "Domino Printech India Pvt.Ltd. Vs. CCE & ST Gurgaon, Haryana 2019-TIOL-3428- CESTAT-Chandigarh" had occasion to consider similar issue and observed as under:
11. We find that the imported ink container, the appellant has availed credit of CVD paid by them on the premise that the activity of refilling / relabelling.
As discussed above, as per Chapter Note 7 to Chapter 32, the activity undertaken by the appellant does not amount to manufacture. Therefore, the appellant is not entitled to avail credit of CVO paid by them at time of import. But as per the decision of the Hon'ble Bombay in the case of Ajinkya Enterprises (supra), by upholding the finding of this Tribunal that if the activity does not amount to manufacture and the goods have been cleared on payment of duty, in such case, the duty paid by the assessee which has 6 Excise Appeal No.42147 of 2014 been accepted by the department and more than the credit availed. In that circumstances, the duty paid by the assessee shall amount to reversal of credit and the assessee is not required to reverse the credit. Admittedly in this case, the appellant cleared the said imported goods after refilling on payment of duty. Therefore, if the activity does not amount to manufacture, in that case, the duty paid by the appellant shall amount to reversal of credit. Therefore, the appellant is not required to reverse the credit of CVD availed by the appellant at the time of import.
3.4 In the case of M/s. R K Packaging Vs. CCE, Mumbai2019-TIOL- 988-CESTAT, Mumbai, the issue considered was whether the credit availed has to be reversed when the activity is alleged to be not manufacture. The demand was set aside by the Tribunal following the decision of the Hon'ble High Court of Bombay in Ajinkya Enterprises. The relevant para reads as under:
"5. We have carefully considered the submissions advanced by both sides. The short issue involved for determination in the present case is whether the appellant is entitled to CENVAT Credit of duty paid on various inputs used in or in relation to assembly of packing kits, on which appropriate duty was paid by the appellant. The Revenue proposed to deny the credit only on the ground that the assembly of various inputs into packing kits does not amount to manufacture. However, there is no dispute of fact that appropriate duty has been paid and collected by the Revenue on the packing kits. The issue, in our view, is no more res integra and covered by the decision of Hon'ble Bombay High Court in the case of AjinkyaEnterprises (supra) and dealing the similar issue the Hon'ble Bombay High Court has held as under:-
"10 Apart from the above, in the present case, the assessment on decoiled HR/CR coils cleared from the factory of the assessee on payment of duty has neither been reversed nor it is held that the assessee is entitled to refund of duty paid at the time of clearing the decoiled HR/CR coils. In these circumstances, the CESTAT following its decision in the case of Ashok Enterprises 2008 (221) E.L.T. 586 (T) = 2008- TIOL-312-CESTAT-MAD. "Super Forgings 2007 (217) E.L.T. 559 (T) = 2007-TIOL-2040-CESTAT-MAD "S.A.I.L 2007 (220) E.L.T. 520 (1) 2009 (15) ST.R. 640 (Tribunal), M.P. Telelinks Limited - 2004 (178) E.L.T 167 (T) = 2004-TIOL-77-CESTAT-DEL and a decision of the Gujarat High Court in the case of CCE Vs. Creative Enterprises reported in 2009 (235) E.L.T. 785 (Guj.) = 2008-TIOL-784-HC-AHM-CX has held that once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity does not amount to manufacture. Admittedly, similar view taken by the Gujarat High Court in the case of Creative Enterprises has been upheld by the Apex Court (see 2009 (243) E.L.T. A121) by dismissing the SLP Bled by the Revenue."
6. In view of the judgement of the Hon'ble Bombay High Court, the impugned orderis devoid of merit and consequently, the same is set aside and the appeal is allowed with consequential relief, if any, as per law. 3.5 Similarly, in the case of M/s. Tristar Enterprises Vs. CCE Mumbai, 2019- TIOL-3247-CESTAT, Mumbai, it was held that once duty is paid on finished products and accepted by the department, the CENVAT credit availed on the inputs need not bereversed even if the activity does not amount to manufacture.
5. "We have carefully considered the submissions advance by both sides. The short issue involved in the present appeal for determination is 7 Excise Appeal No.42147 of 2014 whether the assessee is entitled to CENVAT credit of duty paid on raw materials which were processed and resulted into finished product and cleared on payment of duty. The allegation of the Revenue is that since the process of manufacture undertaken on the raw material did not amount to 'manufacture', within the definition of Section 2(f) of the Central Excise Act, 1944, hence, the appellant was not required to discharge duty, accordingly, not entitled to avail credit on the inputs. We find that the issue is no more res integra being covered by the judgement of the Hon'ble Bombay High Court in the case of Ajinkya Enterprises (supra). The Lordships, after taking note of the relevant provisions of law, observed as follows:-
"10. Apart from the above, in the present case, the assessment on decoiled HR/CR coils cleared from the factory of the assessee on payment of duty has neither been reversed nor it held that theassessee is entitled to refund of duty paid at the time of clearing the deoiled HR/CR coils. In these circumstances, the CESTAT following its decision in the case of Ashok Enterprises- 2008 (221) E.L.T. 586 (T) = 2008-TIOL- 312-CESTAT-MAD. 'Super Forgings-2007 (217) E.L.T. 559 (T) 2007-TIOL 2040- CESTAT-MAD 'S.A.L.L.-2007 (220) E.L.T. 520 (T) 2009 (15) ST.R. 640 (Tribunal), M.P. Telelinks Limited - 2004 (178) E.L.T. 167 (T) = 2004-TIOL-77- CESTAT-DEL and a decision of the Gujarat High Court in the case of CCE v. Creative Enterprises reported in 2009 (235) E.L.T. 785 (Guj)=2008- TIOL-784-HC AHM-CX has held that once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity docs not amount to manufacture. Admittedly, similar view taken by the Gujarat High Court in the case of Creative Enterprises has been upheld by the Apex Court (see 2009 (243) E.L.T. A121] by dismissing the SLP filed by the Revenue."
5.1 The principle laid down by the Hon'ble Bombay High Court has also been followed by this Tribunal in a number of cases including in t case of Shripad Engineering Works (supra). Also, the demand under Section 11D of the Central Excise Act, 1944 is untenable in law in view the ratio laid down in Shivam Metals case (supra)
6. Thus, following the aforesaid precedents, we do not find merit in the impugned order. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief, if any, as per law.
4 After considering the facts, evidence and following the decisions as above, we are of the opinion that the demand cannot 8 Excise Appeal No.42147 of 2014 sustain and requires to be set aside. The impugned order is setaside. The appeal is allowed with consequential reliefs if any."
8. Ld.A.R 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.
9. From the above discussions and following the decisions (supra), we are of the view that the disallowance of credit is not justified. The impugned order is set aside. Appeal is allowed with consequential relief, if any.
(Dictated and pronounced in court)
sd/- sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI. C.S)
Member (Technical) Member (Judicial)
gs