2011 (2) TMI 479 - AT - Central Excise

Clearance of exempted goods on payment of duty - Whether Cenvat Credit to be allowed to the assessee - Notification No.53/88-CE dated 01.03.88 - Proceedings were initiated against them by way of issuance of a show cause notice dated 01.12.95 proposing to deny the modvat credit availed by them during the period January 1991 to July 1991 on the ground that as their final product was exempted, though they have cleared it on payment of duty, they were not entitled to avail the modvat credit - in the case of CCE Vadodara Vs. Narmada Chematur Pharmaceuticals Ltd. (2004 -TMI - 47174 - SUPREME COURT OF INDIA). It was held by the Hon ble Court that when amount of cenvat/modvat credit wrongly availed is exactly equivalent to the amount of excise duty paid by not availing the exemption, the consequence is revenue neutral - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant was entitled to avail modvat credit on duty paid inputs despite clearing final products on payment of duty instead of claiming exemption under Notification No.53/88-CE dated 01.03.88.

Analysis:
The appellants, engaged in manufacturing LDPE plastic bags and rolls, were subject to proceedings initiated by a show cause notice proposing to deny the modvat credit availed by them for the period January 1991 to July 1991. The issue revolved around whether the appellants, who chose to clear their final product on payment of duty instead of claiming exemption, were entitled to avail the modvat credit. The lower authorities confirmed a demand and imposed a penalty, leading to the appeal.

The Tribunal noted that the issue had been settled by previous decisions, particularly referencing the case of PSL Holdings Ltd. Vs. CCE Rajkot. The Tribunal's judgments on the disputed issue were not considered by the Commissioner (Appeals). Additionally, the Gujarat High Court and the Supreme Court had held that it is the option of the assessee to pay tariff duty rate and cannot be forced to claim exemption. The Supreme Court further clarified that if the amount of cenvat/modvat credit wrongly availed is equivalent to the excise duty paid by not availing the exemption, it results in a revenue-neutral situation.

Based on the precedents and legal principles established by the Tribunal, High Court, and Supreme Court, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The early hearing application, stay petition, and appeal were disposed of accordingly.