Empty Packaging Material Of Cenvatable Input Is Not Liable For Payment As Excise Duty Or As CENVAT Credit: Reiterates Ahmedabad CESTAT

The Single Bench of Judicial Member Ramesh Nair held that the assessee was not liable to pay any amount on the clearance of the said empty drums.

The revenue authorities had passed an order against the assessee Cadila Healthcare Ltd. that in terms of Rule 6(3) of the CENVAT Credit Rules, 2004, the assessee was required to pay an amount of 6% on the clearance of empty packaging drums of cenvatable input since the said drums were non-excisable goods. In the appeal filed by the assessee before the Commissioner (Appeals), the said demand was confirmed on the ground that the drums were non-excisable goods. Against this, the assessee filed an appeal before the CESTAT.

The assessee Cadila Healthcare Ltd. submitted before the CESTAT that since the said empty drums were not generated during the process of manufacture and that since they were cleared after emptying the inputs, hence, the said empty packaging drums were not liable for payment under Rule 6(3) of the CENVAT Credit Rules.

The CESTAT observed that the revenue authorities had held that since the empty drums of cenvatable input were non-excisable goods, therefore, their clearance would attract an amount of 6% in terms of Rule 6(3) of CENVAT Credit Rules.

The CESTAT noted that in the case of Banco Gasket I Ltd. versus CCE &ST (2021), the Ahmedabad Bench of CESTAT had noted that as per Explanation 1 and 2 of Rule 6(1) of the CENVAT Credit Rules, only goods which are defined under Clause (d) and Clause (h) of Rule 2, i.e., the "exempted goods" and "final products", respectively, would be covered for the purpose of demand under Rule 6(3). The CESTAT, in that case, had ruled that in view of the definition of "exempted goods" and "final products", the said goods should be arising out of the manufacturing activity, even though after the manufacturing process the said goods may or may not be excisable goods. The CESTAT had held that since the packaging material was not arising out of any manufacturing process carried out by the assessee, the same would not fall under Clause (d) or Clause (h) of Rule 2 of CENVAT Credit Rules. Hence, the CESTAT had held that removal of empty packaging material would not attract any duty under Rule 6(3).

The CESTAT in Banco Gasket I Ltd. (2021) had further observed that the Supreme Court in the case of Commissioner of Central Excise versus West Coast Industrial Gases Ltd. (2003) had ruled that there is no specific provision under the CENVAT Credit Rules that provides for levying duty on drums, barrels and containers that are used for packaging modvatable inputs.

Hence, the CESTAT ruled that it was clear 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, 2004.

Therefore, the CESTAT held that the assessee was not liable to pay any amount on the clearance of the said empty drums. The CESTAT, thus allowed the appeal.

Case Title: Cadila Healthcare Ltd. versus C.C.E. & S.T.-Vadodara-I

Dated: 24.06.2022 (Ahmedabad CESTAT)

Representative for the Appellant/Assessee: Mr. Mitesh Jain, Advocate

Representative for the Respondent: Vinod Lukose

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