2009 (6) TMI 846 - AT - Central Excise

Summary

Issues involved: Availment of Modvat credit on raw materials used in the manufacture of exempted products, demand of 8% amount of the value of exempted final product u/s Rule 6 of Cenvat Credit Rules.

Summary:

Availment of Modvat credit on raw materials:
The appellant, a manufacturer of P&P medicines, availed Modvat credit of duty paid on raw materials used in manufacturing dutiable and exempted products. An audit objection was raised regarding the credit on raw materials used in exempted products. The appellant reversed the Modvat credit along with interest, amounting to Rs. 23,22,633/- and Rs. 4,94,031/- respectively.

Demand of 8% amount under Rule 6:
The Revenue initiated proceedings against the appellant, demanding 8% of the value of the exempted final product u/s Rule 6 of Cenvat Credit Rules. The CCE Ahmedabad confirmed the demand of Rs. 70,80,591/- along with a penalty of the same amount. The appellant contended that by reversing the credit, it was as if no credit was availed, citing various judgments including the case of M/s. Chandrapur Magnet Wires Ltd. and M/s. Maize Products v. CCE II, Ahmedabad.

Judgment:
The Tribunal found that the Commissioner chose to follow Board's circulars over Tribunal decisions, citing the case of M/s. Dhiren Chemical Industries. However, the Tribunal held that when Board's instructions conflict with higher forum decisions, judicial discipline requires following the orders of the higher appellate forum. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.