2011 (11) TMI 216 - AT - Central Excise

Demand raised on the value of final product cleared without payment of duty on the ground that assessee have utilized common modvatable inputs for the manufacture of dutiable as also exempted final product - Demand set aside by Commissioner - Held that - In view of decision given in case of CCE vs. Happy Forging (2011 - TMI - 201440 - Punjab and Haryana High Court) holding that Cenvat Credit cannot be availed in respect of inputs used in manufacture of exempted goods, the same has to be read with the notification - availing of Cenvat Credit is permissible by job worker, subject to the final manufacturer paying the duty thus, the matter is remanded back to Commissioner for fresh decision in the light of the above declaration of law and after ascertaining the factual position. - Revenue s appeal is allowed by way of remand.

Summary

Issues:
- Appeal against dropping of demand of Rs.9.63 crores approx. by the Commissioner based on utilization of common modvatable inputs.
- Interpretation of law for recovery of amounts not classified as duty or modvat credit.
- Consideration of goods manufactured on job work and cleared without payment of duty as exempted products under Rule 57C of Central Excise Rules.

Analysis:
1. The appeal was filed by the Revenue against the Commissioner's order dropping the demand of Rs.9.63 crores approx. The demand was raised due to the utilization of common modvatable inputs for manufacturing both dutiable and exempted final products. The Commissioner set aside the demand, stating that there was no provision in the law for the recovery of such amounts, which were neither classified as duty nor modvat credit. The Commissioner relied on a previous Tribunal decision in the case of Pushpman Forgings vs. CCE.

2. During the appeal hearing, attention was drawn to a Larger Bench decision of the Tribunal in the case of Sterlite Industries (I) Ltd. vs. CCE Pune. This decision clarified that goods manufactured on job work and cleared without duty payment to the principal manufacturer, who later clears them after paying duty, should not be considered exempted products under Rule 57C of the Central Excise Rules. This Tribunal decision was upheld by the Hon'ble High Court, and a similar decision by the Hon'ble Punjab & Haryana High Court in the case of CCE vs. Happy Forging further supported this interpretation.

3. Consequently, the Tribunal set aside the Commissioner's order and remanded the matter for a fresh decision in light of the legal declarations provided by the aforementioned decisions. Both parties consented to this decision, and the Revenue's appeal was allowed by way of remand. The Tribunal pronounced its decision in open court, ensuring clarity and transparency in the judicial process.