2011 (3) TMI 941 - AT - Central Excise

Demand - Cenvat credit on inputs - manufactured and cleared Lidoncaine USP and Lidocaine HCL on payment of central excise duty @ 16%. These goods, as allowed by the Revenue were exempted from payment of duty vide Notification Nos.6/2000 dated 01.03.2000, 3/2000-CE dated 01.03.01 and 6/2002-CE dated 01.03.02 considering them as Anesthetics - Since the appellants were wrongly availing and utilizing the credit for manufacture of exempted goods show cause notices were issued to them for recovery of the amount equivalent to such credit - the issue is no more res integra and stand decided by the Hon ble Mumbai High Court in case of Bombay Dyeing & Mfg. Co. Ltd. v. CCE, Mumbai as reported in (2000 -TMI - 50277 - CEGAT, MUMBAI) as also by Hon ble Supreme Court decision in the case of CCE, Vadodara v. Narmada Chematur Pharmaceuticals Ltd. (2004 -TMI - 47174 - SUPREME COURT OF INDIA) - It stand clarified by these judgments that where the amount of credit wrongly availed is exactly equivalent to excise duty paid by not availing exemption, the consequence is Revenue neutral and demand for such wrong availment of credit cannot be sustained.

Summary

Issues:
- Whether Lidocaine HCL/USP manufactured by the appellants are exempted from payment of duty.
- Whether the appellants were entitled to avail credit on inputs used in the manufacture of exempted goods.
- Whether the appellants had the right to opt for availing the exemption or paying the excise duty.

Analysis:

1. The case involved M/s. Gufic Bioscience Ltd. availing cenvat credit on inputs for manufacturing exempted goods, Lidocaine USP and Lidocaine HCL. Show cause notices were issued for recovery of wrongly availed credits. The Joint Commissioner confirmed the demand, penalties, and interest, which was upheld by the Commissioner (Appeals).

2. The main issue was whether the finished products were exempted from duty as per relevant notifications. The appellants argued their products were multi-functional and not solely anesthetics. They cited case laws and circulars to support their contention.

3. The Tribunal considered the nature of the finished products and the interpretation of rules regarding availing credit on inputs for exempted goods. The appellants' right to choose between availing exemption or paying duty was a significant point of contention.

4. The Tribunal emphasized the importance of testing the finished product to determine its specific use and function. The appellants provided evidence from the British Pharmacopeia to support their claim that the product had multiple uses.

5. The Tribunal reviewed past judgments and circulars to determine the legality of the appellants' actions. They highlighted the statutory force of exemption notifications and modvat rules, emphasizing the assessee's right to choose between exemption and paying duty.

6. The Tribunal referred to specific cases where wrongly availed credit equivalent to excise duty paid by not availing exemption was considered revenue-neutral. They remanded one specific Show Cause Notice for further examination due to discrepancies in figures.

7. Ultimately, the Tribunal held that the order of recovery of cenvat credit had no legal support and was set aside. The imposition of penalties and recovery of interest were also deemed unsupported by law. One specific case was remanded for de-novo adjudication.

8. The appeal was disposed of accordingly, with the Tribunal's decision based on legal interpretations, past judgments, and the specific circumstances of the case.