Repackaging & processing

1906 views 2 replies

Jigar Shah

Director

25 Points Joined April 2012

We are manufacturers of Chemicals. We sometimes import the same goods (in 25 kg packing) that we manufacture and bring it to our manufacturing premises.

These goods would be either used in making different product, purified to make a higher grade of the same product or dried and packed in our packaging (of 25 kg) or some times even just repacked in our packaging of 25 kg.

There is no issue with the material used to produced different product and higher grade of Product.

However the issue is treatment of the product that may be just repackaged in identical packaging. How is this product to be clear and is it OK to clear this goods as manufactured goods?

To be on a safer side, we always clear all goods as manufacturer (we do not have dealer registration) and pay excise duty on goods cleared from our works and avail the CENVAT credit on imported goods. The CENVAT Credit availed on imported goods would always be less than the EXCISE Duty paid on repackaged goods cleared from factory.

What should be the procedure be followed in such situation and is the procedure followed by us OK or will it lead to any procedural lapses?

Please advise.

Replies (2)

Rakshit

practising

338 Points Joined November 2011

Cenvat is not admissible where manufacture is not there. Your procedure adopted by you in respect of repacked goods is wrong. It may create excise liability on you for taking wrong cenvat credit alingwith the interest and penalty. pl. see CBEC Board's Circular issued in 2010. For repacking amount to manufacture or not pl. see section 2 (f) (iii) of the Centralo Excise Act. 1944. Pkl. take immediate action as you are going to have recurring laibiliy fastened on you.

R C Verma 09810525780

Jigar Shah

Director

25 Points Joined April 2012

Dear Sir

Thanks very much for prompt reply and advising us to correct the practice.

I have gone through the circular and the same reads as under:

Circular No. 911 /01 /2010-CX

F.No.267/116/2009-CX8

Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)

New Delhi dated the 14^th January, 2010

To,

All Director Generals,

All Chief Commissioners of Central Excise (including LTU),

All Commissioners of Central Excise (including LTU).

Sir/ Madam,

Subject: Irregular availment of Cenvat credit on certain activities not amounting to manufacture-reg.

Reference has been received from field formations stating that though certain activities including connectorising, testing, repacking and relabeling of feeder cables, cutting of HR/CR coils into sheets or slitting into strips do not amount to manufacture, such processors are taking Cenvat credit and justifying their Cenvat availment on ground that they are paying duty on final products.

2. The matter has been examined. As per the provisions of Rule 3 of the CENVAT Credit Rules, 2004, read with Rule 6, credit of duty paid on the inputs is allowed only if these inputs are used in the manufacture of a final product. The Board vide circular dated 26.09.07 issued from F.No.93/1/2005-CX3, had clarified that if the process does not amount to manufacture, duty is not required to be paid and hence no Cenvat credit of duty paid on inputs is admissible. Attention is also invited to the provisions of Section 5B of the Central Excise Act, 1944, where an assessee, who has paid excise duty on a product under the belief that the same is excisable, but subsequently the process of making the said product, is held by the Court as not amounting to manufacture, in such cases, the Central Government may issue an order for non-reversal of such credit in past cases.

3. In view of above, following instructions are issued:-

In cases where the process undertaken by an assessee indisputably does not amount to manufacture, the department should inform the assessee about the correct legal position and advise him not to pay duty and not to avail credit on inputs.
If the assessee has already paid duty, and in a situation where there is no manufacture as held by the Courts subsequently, and facts of the case are covered by the provisions of Section 5B of the Central Excise Act, 1944, the assessee is at liberty to approach the Central Govt. for issue of appropriate notification for regularization of the Cenvat credit availed.

Under the present circumstances, we have already availed the credit and also paid the duty. As read from above circular, whom should we approach for regularisation of Cenvat Credit availed?

Thanks & best regards

Jigar Shah