Revenue neutrality cannot be presumed without factual quantification of available CENVAT credit.

The 1st Respondent imports ready-to-use unexposed photo colour film rolls in canisters and places them in printed cartons with a brand name and MRP.

The Revenue issued a show-cause notice on 29.08.2006, treating this process as "manufacture" under Section 2(f)(iii) of the Central Excise Act and demanding duty for the period 01.03.2003 to 31.08.2004 via the extended period of limitation.

The Original Authority confirmed a demand of ₹20,37,33,174, plus interest and penalty.

On appeal, the CESTAT (Tribunal) set aside the demand, holding that the claim was revenue neutral (as the Respondent could avail CENVAT credit) and barred by limitation.

The Revenue appealed to the High Court, asserting that credit was unavailable for duty paid via DEPB scrips during the relevant period and that suppression justified the extended limitation.

1. Whether the appeal is maintainable before the High Court under Section 35G given the statutory bar regarding "rate of duty" or "excisability".

2. Whether the process undertaken by the Respondent amounted to revenue neutrality, specifically regarding CENVAT credit for CVD paid through DEPB scrips.

3. Whether the Revenue was justified in invoking the extended period of limitation under Section 11A due to suppression of facts.

Section 2(f)(iii) of the Central Excise Act, 1944, which defines "manufacture" to include packing/repacking or labeling/re-labeling of goods.

The Division Bench precedent in Mohan Breweries & Distilleries Ltd. v. Commr. Of C.Ex. [2015 (325) E.L.T. 42 (Mad.)], which established that CENVAT credit cannot be claimed for Additional Customs Duty (CVD) paid via debiting DEPB scrips for the period between April 2000 and August 2004.

Section 11A regarding the extended period of limitation and Section 11AC regarding penalties for evasion of duty.

The Court first dismissed the challenge to maintainability, noting that the Respondent had accepted the finding of "manufacture" before the Tribunal; thus, excisability was no longer a live issue but a settled fact.

For the period up to 31.08.2004, the Court held that under the EXIM policy and Mohan Breweries precedent, duty paid via DEPB scrips does not entitle an assessee to CENVAT credit because the scrip is an exemption that extinguishes upon use, meaning no actual duty was "paid" in cash.

For the period post-August 2004, the Court found the Tribunal lacked factual evidence to quantify if the available credit actually exceeded the duty demand.

The Court restored the Original Authority’s finding on limitation, ruling that the Respondent’s deliberate concealment of activities to evade payment justified the five-year extended reach under Section 11A.

The High Court allowed the appeal, answering all substantial questions of law in favor of the Revenue. The Tribunal's Final Order No. 905/2007 was set aside, and the original demand, interest, and penalty were restored.