2011 (3) TMI 1279 - AT - Central Excise

Export rebate retained - Application for stay - Deemed credit denied - Held that - Notification No. 6/2002-C.E. (N.T.), dated 1-3-2002 under which the credit was availed, the manufacturer of processed fabrics is entitled to avail deemed cenvat credit to the extent of 66.67% of the duty payable on finished goods - The department, however, accepted 33.33% of duty paid in cash.Therefore, benefit of deemed credit under Notification No. 6/2002-C.E. (N.T.), cannot be denied. Extended period invoked - Held that - The grey fabrics were received by the appellant under the cover of challans and invoices and after processing, the clearance was done on payment of duty under the cover of Central Excise invoices and ARE-1s on making necessary entries. Necessary monthly returns also seem to have been filed. The show cause notice was issued on 4-5-2007, whereas the clearance of grey fabrics were made on 30-4-2002 and 2/3-5-2002, i.e. after five years. Therefore, invoking the extended period of limitation in this case is not justified - Decided in favor of the assessee

Summary

Issues:
1. Rebate claim based on forged documents.
2. Denial of deemed credit to the appellant.
3. Limitation period for invoking extended period.

Analysis:
1. The appellant, an independent processing house, processed grey fabrics into processed fabrics on job work basis for a merchant exporter. The exporter filed a rebate claim based on forged documents, leading to a show cause notice and adjudication by the original authority. The Commissioner (Appeal) confirmed the Order-in-original, re-determining the recoverable amount and reducing the penalty accordingly.

2. The appeal challenged the decision, arguing that the department cannot allow the exporter to retain the rebate and recover it by denying deemed credit to the appellant. The appellant contended that they had already deposited the duty demanded and provided supporting evidence of payment through various means. The Tribunal noted that under Notification No. 6/2002-C.E. (N.T.), the manufacturer is entitled to deemed cenvat credit, and the benefit cannot be denied based on the lack of correlation between inputs and duty paid invoices.

3. The Tribunal referred to precedents such as Shree Shiv Vijay Processors Pvt. Limited v. CCE, Surat and CCE, Nasik v. Jain Irrigation System Limited to support the appellant's right to deemed credit. Additionally, the Tribunal found that the extended period of limitation for invoking the case was not justified, as the necessary documentation and returns were filed in a timely manner. Consequently, the impugned order was set aside, granting relief to the appellant.