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2013 (12) TMI 1509 - HC - Central ExciseMODVAT credit - job work - N/N. 214/86-C.E. - Whether the CESTAT is right in giving relief of ₹ 8,32,966/- to the assessees without considering the procedure laid down in the Notification No. 214/86-C.E. (as amended), dated 25-3-1986? - Held that - reliance placed in the decision of the case of Commissioner of Central Excise, Chandigarh v. Ranbaxy Labs. Ltd. 2006 (7) TMI 216 - PUNJAB AND HARYANA HIGH COURT , where it was held that the benefit availed by the assessee, of Cenvat credit of the duty paid on the input by the sister concern was not liable to be denied to the assessee on the strength of the N/N. 214/86-C.E., dated 25-3-1986. Whether the CESTAT is right in holding that Modvat credit availed by an assessee was exactly equivalent to the amount of Excise duty paid by the input manufacturer without availing exemption, the consequence being revenue neutral and hence there could be no demand for reversal of the credit? - Held that - reliance was placed in the case of Commissioner of Central Excise & Customs, Vadodara v. Narmada Chematur Pharmaceuticals Ltd. 2004 (12) TMI 93 - SUPREME COURT OF INDIA , where it was held that what had been availed of by the assessee by way of Modvat credit, was in respect of the duty paid by the input-manufacturer not availing the exemption, and the fact being the revenue neutral, the question of reversing the claim made by the assessee did not arise. Appeal dismissed - decided against Revenue.
Issues:
1. Interpretation of Notification No. 214/86-C.E. regarding exemption from duty. 2. Validity of availing Cenvat credit on inputs processed by job worker. 3. Application of Modvat credit and revenue neutrality principle. 4. Reversal of Cenvat credit based on duty remitted by job worker. Issue 1: Interpretation of Notification No. 214/86-C.E. regarding exemption from duty The case involved a dispute where the assessee, a manufacturer of printed cartons, availed Cenvat credit for duty paid on inputs processed by a job worker, Unit-I. The Revenue contended that as per Notification No. 214/86-C.E., job work done by Unit-I was exempted from duty payment, and thus, the assessee should not have claimed Cenvat credit. The Commissioner upheld the demand for recovery of duty along with interest and penalty. However, the Tribunal disagreed, citing precedents and held that the benefit of Cenvat credit could not be denied based on the notification. Issue 2: Validity of availing Cenvat credit on inputs processed by job worker The Tribunal considered the decision in Rosa Sugar Works v. CCE, Lucknow, and other relevant cases, concluding that the assessee was entitled to claim Cenvat credit of duty paid on inputs processed by a sister concern. The Tribunal emphasized that the Cenvat credit availed was not liable to be denied to the assessee based on the notification exempting job work from duty payment. The Tribunal also referred to the Supreme Court's decision in Commissioner of Central Excise & Customs v. Narmada Chematur Pharmaceuticals Ltd. to support its ruling. Issue 3: Application of Modvat credit and revenue neutrality principle The Tribunal further analyzed the application of Modvat credit and the revenue neutrality principle. It referenced the Supreme Court's decision in Ranbaxy Labs Ltd. and concluded that if the Modvat credit wrongly availed by the assessee was equivalent to the duty paid by the input manufacturer without availing exemption, the consequence was revenue-neutral. Therefore, there was no basis for demanding reversal of the Cenvat credit. Issue 4: Reversal of Cenvat credit based on duty remitted by job worker The Revenue argued that the job worker was not entitled to claim exemption under the notification, and thus, the assessee should not have availed Cenvat credit. However, the Court disagreed, highlighting that the Modvat credit availed by the assessee was equivalent to the duty paid by the input manufacturer, resulting in revenue neutrality. As per the Court's interpretation of relevant decisions, there was no justification to allow the Revenue's appeal, and it was dismissed. In conclusion, the High Court upheld the Tribunal's decision, dismissing the appeal by the Revenue in both cases (C.M.A. No. 2752/2008 and C.M.A. No. 456/2009) based on the application of legal principles regarding Cenvat credit, Modvat credit, and the interpretation of the notification granting exemption from duty for job work.
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