2008 (6) TMI 416 - AT - Central Excise

Stay/Dispensation of pre-deposit - Manufacture - metallisation of polyester film - utilisation of Cenvat/Modvat credit -

Summary

Issues:
1. Utilization of Cenvat credit in the metallisation process of polyester film.
2. Whether metallisation of polyester film amounts to 'manufacture' under the Central Excise Act.

Analysis:
1. The dispute in the appeal revolves around the utilization of Cenvat credit and whether the metallisation process of polyester film constitutes 'manufacture' under the Central Excise Act. The Joint Commissioner of Central Excise confirmed the demand for recovery of Cenvat credit and imposed a penalty, which was later reduced by the Commissioner on appeal.

2. The Appellate Tribunal considered the argument regarding waiver of stay and examined the Supreme Court's decision in Metlex (I) Pvt. Ltd. v. CCE, New Delhi. While the Supreme Court held that metallisation does not result in a new product and, therefore, does not amount to manufacture, it was noted that this finding was made due to the lack of evidence on the manufacturing process.

3. The Tribunal emphasized that the burden of proof lies with the Revenue to establish whether a new and distinct product emerges from the process. As the Revenue failed to provide evidence supporting their claim, the Tribunal accepted the assessee's contention that metallisation does amount to 'manufacture'.

4. The assessee presented detailed information on the metallisation process, highlighting the use of specialized machinery and techniques to create a distinct product suitable for packaging food items. The end-product resulting from this process differs significantly from the original film and is essential for its intended use.

5. The Tribunal acknowledged that previous decisions following Metlex (I) Pvt. Ltd. were subject to scrutiny, as evidenced by the case of Kuwer Industries Ltd. v. CCE, Noida. The Supreme Court remanded the decision in the latter case to further investigate whether metallisation constitutes 'manufacture'.

6. Ultimately, the Tribunal concluded that the Metlex (I) Pvt. Ltd. decision is not definitive, and the determination of whether metallisation amounts to 'manufacture' must be based on factual analysis. As such, the question of whether a new product emerges from the metallisation process remains open for consideration.

7. Considering the arguments presented and the lack of conclusive evidence against the assessee's position, the Tribunal found that the appellant had a prima facie case for waiver of pre-deposit. Consequently, the pre-deposit of duty and penalty was waived, and the recovery thereof stayed pending the appeal's disposal.