2007 (4) TMI 442 - AT - Central Excise

Cenvat/Modvat - Inputs sent to job worker after availing credit - Demand - Limitation - Revenue neutrality

Summary

Issues:
- Central Excise duty on drugs
- Modvat credit on inputs
- Job work of 6 APA
- Demand raised for not following Rule 57F procedure
- Denial of Modvat credit
- Delayed show cause notices
- Extended period under Section 11A
- Fraud, suppression of facts, etc.
- Non-disclosure of transactions
- Intent to evade duty
- Penalties

Central Excise Duty on Drugs:
The appellant, a manufacturer of certain drugs subject to Central Excise duty, received inputs eligible for credit. These inputs were transferred to another appellant for conversion into an intermediate product, 6 APA, due to technical reasons. The intermediate product was then used in manufacturing the drugs.

Modvat Credit on Inputs:
The Modvat credit taken by the appellant on inputs sent for the manufacture of 6 APA was denied because the prescribed procedure under Rule 57F was not followed. The appellant's action was also considered a violation of Notification No. 214/86.

Job Work of 6 APA:
The manufacture of 6 APA by another entity was considered job work, and no duty was paid for this job work. However, duty demands were raised due to non-compliance with Rule 57F procedure.

Demand Raised for Not Following Rule 57F Procedure:
Duty demands were raised against the appellant for the 6 APA manufactured by another entity because the prescribed procedure under Rule 57F was not followed.

Delayed Show Cause Notices and Extended Period under Section 11A:
Show cause notices were issued in March 1998 for disputes dating back to 1993-1997, invoking the extended period of five years under the proviso to Section 11A of the Central Excise Act, 1944.

Intent to Evade Duty:
The appellant argued that the demand should be quashed based on limitation alone, as there was no fraud or suppression of facts. The appellant contended that the extended period for demand should only apply in cases involving intent to evade duty.

Non-Disclosure of Transactions and Penalties:
The records showed that the transactions were accounted for in the books of both parties, although not as per rules. The Tribunal accepted the appellant's argument that the demands were hit by limitation, as the situation was revenue neutral. Penalties were quashed as they cannot survive in the absence of duty demands.

In conclusion, the impugned orders were set aside, and the appeals were allowed with consequential relief to the appellants.