2010 (5) TMI 406 - HC - Central Excise

Cenvat credit - wrongly availed - die blocks which are used in the manufacture of moulds and dies and in turn these moulds and dies are used in the manufacture of goods processed on job work basis and cleared the same without payment of duty contrary to the provisions of erstwhile Rule 57AD of Central Excise Rules, 1944 read with Rule 6 of CENVAT inasmuch as they were wrongly availing Cenvat credit on the inputs - demanding the assessee to pay the amount that was wrongly availed, along with interest and penalty - respondent-assessee filed an appeal before the competent authority who in return without considering the relevant material on record and without assigning valid reasons proceeded to allow the appeal filed by the respondent Held that - Tribunal has committed a grave error in passing the order impugned without assigning any valid reasons and without any discussion. By merely following the order passed in similar matters it has proceeded to pass the impugned order, allowing the appeal filed by the respondent - order is cryptic in nature and such a non-speaking order cannot be sustained - matter stands remitted back to the Tribunal for fresh consideration.

Summary

Issues:
1. Interpretation of Rule 57AH of Central Excise Rules, 1944/Rule 12 of Cenvat Credit Rules, 2002 regarding forgings used for manufacturing capital goods.
2. Applicability of notification No. 67/95-C.E. for moulds and dies used in manufacturing forged components on job work basis.

Analysis:
The judgment by the High Court of Karnataka involved the appellant challenging the order passed by the CESTAT, Bangalore, in Appeal No. 1103/05. The appeal was admitted to consider two substantial questions of law. Firstly, whether forgings used for manufacturing capital goods but not utilized in the final product fall under Rule 57AH of Central Excise Rules, 1944/Rule 12 of Cenvat Credit Rules, 2002. Secondly, whether notification No. 67/95-C.E. applies to moulds and dies used in manufacturing forged components on job work basis and cleared at NIL rate of duty.

The case background revealed that the respondent had availed Cenvat credit on die blocks used in manufacturing moulds and dies, which were further utilized in producing goods on job work basis without duty payment. A show-cause notice was issued by the Assistant Commissioner of Central Excise, demanding repayment of the wrongly availed amount along with interest and penalty. The respondent filed an appeal, which was allowed without proper reasoning by the competent authority. The High Court noted that the Tribunal's order lacked valid reasons and discussion, being merely based on previous decisions without proper analysis. Consequently, the High Court found the order to be cryptic and non-speaking, leading to its setting aside.

As a result of the above findings, the High Court allowed the appeal, setting aside the impugned order and remitting the matter back to the Tribunal for fresh consideration. The Tribunal was directed to reevaluate the case in accordance with the law, providing a reasonable opportunity to the parties and ensuring an expeditious disposal. Importantly, all grounds raised by the parties were left open for further examination.