2011 (6) TMI 93 - AT - Central Excise

Deemed credit - Notification No. 6/2002-CE (NT)- job work - export of processes fabrics and ready made garments - fake export - Held that - It is fact that excise duty has been paid on the processed fabrics and therefore, the rebate claim documents filed have been found to be forged, will have no impact on the appellants - It is obvious that the credit taken by the appellants is allowable and as per requirement of law - It is also not a pre-requisite that there should be co-relation between inputs - therefore, find that the appellants are eligible for the benefit of deemed credit under notification No. 6/2002-CE (NT).

Summary

Issues: Appeal against order of Commissioner (Appeal) Surat regarding rebate of excise duty on exported goods; Confirmation of demand of duty, interest, and penalties; Eligibility for cenvat credit on processed fabrics; Allegations of non-existent/fictitious organization and forged export documents; Verification of receipt of grey fabrics from another party; Denial of modvat credit; Precedent decisions of the Tribunal on similar issues.

Analysis:
1. The appeal was filed against the order of the Commissioner (Appeal) Surat concerning the rebate of excise duty on goods exported. The appellants, engaged in fabric processing on a job work basis, were alleged to have received grey fabrics from another party for processing, but faced proceedings due to non-existent/fictitious organizations and forged export documents.

2. The original adjudicating authority confirmed a demand of Rs. 16,12,620/- along with interest and penalties. The appeal to the Commissioner (Appeal) resulted in a dismissal, albeit with a 25% reduction in the penalty amount. The appellants claimed to have physically received the grey fabrics and cleared them after processing, paying the duty to the other party.

3. The appellants argued that they had received the grey fabrics and processed them, clearing them after payment of duty. They emphasized that they had received payment for job charges via cheques, which were duly encashed, with no evidence of returning cash. They contended that despite the other party's fraudulent activities, they had fulfilled their processing obligations.

4. The issue of denial of modvat credit was addressed by the Tribunal in previous cases. In the case of Shree Shiv Vijay Processors Pvt. Limited vs. CCE, Surat, the Tribunal set aside the demand of duty and penalties, highlighting the payment of duty by the appellants and the utilization of modvat credit. Similarly, in the case of M/s. Shree Narayan Dyeing & Printing Mills vs. CCE, Surat, the Tribunal ruled that excise duty paid on processed fabrics validated the appellants' claim for credit.

5. The Tribunal found that the appellants were eligible for the benefit of deemed credit under Notification No. 6/2002-CE (NT) based on the payment of duty and the legal requirements. The lack of a direct correlation between inputs did not negate the appellants' entitlement to the credit. Consequently, the impugned order was set aside, and the appeal was allowed, along with the disposal of the early hearing application and stay petition.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Tribunal's findings, providing a comprehensive understanding of the case and its implications.