Process of making lacquered plastic film not amounts to Manufacture, CENVAT credit is admissible if such inputs are cleared on payment of duty: CESTAT [Read Order]

The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that process of making lacquered plastic film not amounts to manufacture and CENVAT credit is admissible if such inputs are cleared on payment of duty.

M/s Sandeep Laminators Pvt. Ltd, the appellants are engaged in the manufacture of ‘Plastic Laminates’ falling under Chapter sub-Heading No. 3920.38 and its Pouches falling under Chapter sub-Heading No. 3923.90 of the First Schedule to the Central Excise Tariff Act, 1985. These plastic laminates are further used by the buyers for making packing pouches for Pan Masala and Namkeen Snacks etc.

The appellants are availing CENVAT credit on capital goods and inputs under Rule 3 of CENVAT Credit Rules, 2004. The anti-Evasion Branch of the Department visited the premises of the appellant and found that the appellant is procuring duty paid Polyester/ Metallised Polyester Film and Polyethylene Film and the polyester film is printed with the help of printing machine and then laminated with Metallised/ Polyethylene film by applying adhesive. The various inputs used in the process of which the CENVAT credit has been availed by the appellant.

The anti-Evasion Branch recorded the statements of Shri Pinak Sarkar, Production Manager and Shri Rajesh Goyal, Director of the Company. The Apex Court in the case of Metlex (I) Pvt. Ltd. Vs CCE, in which it was held that laminating/ metallising of duty paid film does not amount to manufacture as the product is a film to start with and remains a film after lamination or metallization and no new and distinct products comes into existence. Thereafter, two show-cause notices dated 05.01.2006 and 07.12.2006 were issued to the appellant and after following the due process, the Commissioner disallowed the CENVAT credit as mentioned above along with interest and penalty.

In various decision, the Supreme Court and High Court has been held that when process undertaken by the assessee does not amount to manufacture, even then the CENVAT credit is admissible if such inputs are cleared on payment of duty which would amount to reversal of credit availed. In view of the ratios of various decisions, the coram comprising Mr S S Garg, Member ( Judicial ) and Mr P Anjani Kumar, Member ( Technical )  set aside the impugned order and allowed the appeal.

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