No Excise Duty or Reversal of Cenvat Credit on Removal of Empty packaging

The CESTAT, Ahmedabad has ruled that companies are not liable to pay excise duty or reverse Cenvat credit on empty packaging materials that contained cenvatable inputs. The tribunal found that these empty containers are not manufactured goods and therefore do not fall under the purview of Rule 6(3) of the Cenvat Credit Rules, 2004. This decision sets aside previous demands for payment on such cleared items.

The CESTAT, Ahmedabad in the matter of M/s. CADILA HEALTHCARE LTD v C.C.E. & S.T.-VADODARA-I [Excise Appeal No. 10100 of 2020 dated June 24, 2022] has held that assessee is not liable for payment of either excise duty or cenvat credit under Rule 6(3) of the Cenvat Credit Rules, 2004 (“the Cenvat Credit Rules”) on empty packaging material ofcenvatable input.

Facts

This appeal has been filed byM/s.CADILA HEALTHCARE LTD (“the Appellant”) against the order-in-Appeal (“the impugned order”)passed by the Commissioner (Appeals), Central Excise, Customs and Service Tax, confirming the demand on clearance of the empty packaging drums by the Appellant, on the grounds of being non-excisable goods and demanding reversal in terms of rule 6(3) of the Cenvat Credit Rules.

The Appellant contented that empty packaging drums of cenvatable input is to be considered as non-excisable goods as they are not generated during the process of manufacturing and is cleared after emptying the inputs, therefore, the same is not liable for payment under Rule 6(3) of the Cenvat Credit Rules.

Issue

• Whether the Appellant isrequired to pay an amount in terms of Rule 6(3) of the Cenvat CreditRules on empty packaging drums of cenvatable input considering thesame as non-excisable goods?

Held

The CESTAT, Ahmedabad in [Excise Appeal No. 10100 of 2020 dated June 24, 2022]held as follows:

• Relied upon the judgement in the case of MS BANCO GASKETS I LTD VERSUS C.C.E. & S.T. -VADODARA-II - Excise Appeal No.10366 of 2021] in which it was held that Show Case Notice was issued demanding the amount of 6% of the value of packaging material and it was nothing but an empty packaging material in which input was received by the Appellant. Therefore, it is the fact that the packaging material is not arising out of manufacture process of any final product.
• State that, empty packaging material of cenvatable input is not liable for payment either as excise duty or as cenvat credit under Rule 6(3) of the Cenvat Credit Rules.
• Held that, the Appellant is not liable to make any payment on clearance on empty drums and hence, the impugned order is set aside.