2013 (9) TMI 346 - AT - Central Excise

Area bases Exemption Notification No.56/2002 - payment of duty without utlizing Modvat / Cenvat Credit and claiming refund of duty paid in cash thereafter - In terms of the said notification, the appellant was required to pay duty by first exhausting their Modvat credit available and then through PLA - Held that - The credit was not availed by the appellant at all and question of utilization does not arise Relying upon CCE, Jammu v. New India Wire & Cables 2008 (7) TMI 213 - CESTAT NEW DELHI - Benefit of a Notification was to be strictly construed so as to achieve the object thereof - Right to exemption of duty (refund) arised only upon fulfilling mandatory conditions of the Notification in question which prescribed priority, mode and sequence of discharge of duty liability during tax holiday period. The notification in question having limited the exemption (refund) to duty paid only on incremental value of output through PLA, exemption (refund) of duty on input component contained in finished goods was not permitted - Claim of Modvat credit during material period being mandate of law, failure to seek set off thereof duly, debars exemption (refund) and right to claim that at a future date is deniable - It may be stated that when inputs extinct upon use in manufacture of the finished goods, deferment of set off of Modvat credit was not permitted - No right was vested with the assessee to carry forward input credit beyond material period in absence of carry forward provision in the Notification in question - Apart from this, no claim for set off of input credit duly during material period proves oblique motive as well as premeditated design of assessee against Revenue intending to be enriched at the cost of the exchequer. Such an act also debars to plead that the proceeding is time-barred. It was rightly observed by ld. Technical Member that there was failure to fulfil mandatory condition of the Notification by the appellant when it failed to use the Modvat credit available to it during tax holiday period. Inadvertent mistake plea of appellant is certainly a misplaced sympathy to sway away Tribunal towards sympathetic consideration. Accordingly observation of learned Technical Member in this regard cannot be brushed aside since claim for Modvat credit was within the exclusive knowledge of appellant in view of its past experience of several years being engaged in the line of manufacture. Failure of appellant to set off Modvat credit diminished its right to exemption (refund) and the plea of revenue neutrality is baseless for non-fulfilment of statutory obligation. Dissenting Opinion Member (Technical) was having a dissenting opinion from Member(Judicial) therefore he delivers a separate judgement as per the majority the Assesse was able to established Prima facie case and was allowed for the waiverd of pre-deposit but the pre-deposit of excess exemption availed from 1-4-2008 onwards (to be quantified by applicant) was required to be made.

Summary

Issues Involved:
1. Availment of Modvat credit after a significant delay.
2. Refund of duty paid through PLA.
3. Invocation of the longer period of limitation.
4. Revenue neutrality.
5. Compliance with the conditions of Notification No. 56/2002-C.E.

Detailed Analysis:

1. Availment of Modvat Credit After a Significant Delay:
The appellant, a manufacturer of P & P Medicaments in Jammu, did not avail the Modvat credit on furnace oil from April 2005 to March 2009, amounting to Rs. 45,72,156/-. This credit was later availed on 14-8-2009. The Commissioner accepted that the availment of credit after three and a half years was in accordance with the Cenvat Credit Rules, as there was no time limit specified for availing credit.

2. Refund of Duty Paid Through PLA:
The appellant paid duty in cash through PLA, amounting to Rs. 41,71,424/-, which was subsequently refunded. The appellant argued that had they availed the Modvat credit during the material period, they would have paid less duty through PLA, resulting in revenue neutrality.

3. Invocation of the Longer Period of Limitation:
The show cause notice was issued on 28-10-2010, proposing the denial of credit availed on 14-8-2009 and the recovery of the erroneously availed refund of Rs. 41,71,424/-. The Commissioner invoked the longer period of limitation, but the appellant contended that the notice was barred by limitation as the Revenue was aware of the credit availment through a letter dated 17-8-2009.

4. Revenue Neutrality:
The appellant argued that the entire exercise was revenue neutral, as the credit availed in August 2009 would have otherwise been availed during the material period, resulting in no revenue loss. The Tribunal referenced the decision in CCE, Jammu v. New India Wire & Cables, which observed that such situations are revenue neutral.

5. Compliance with the Conditions of Notification No. 56/2002-C.E.:
The notification required the manufacturer to first utilize the available Cenvat credit for payment of duty and then pay the balance through PLA, which would be refunded. The Technical Member disagreed with the revenue neutrality argument, stating that the exemption was limited to the duty liability not covered by the Modvat credit and that the appellant's practice violated the express provisions of the notification.

Separate Judgments:
- Judicial Member's View: The Judicial Member found the situation to be revenue neutral and opined that pre-deposit should be waived. He noted that the demand was prima facie barred by limitation.
- Technical Member's View: The Technical Member disagreed, stating that the appellant's practice contravened the express provisions of the notification and that pre-deposit should be called for at least for the period after 1-4-2008.

Final Order:
The majority order required the appellant to make a pre-deposit of the excess exemption availed from 1-4-2008 onwards, to be quantified by the applicant, within eight weeks from the date of the final order. Compliance was to be ascertained on 4-12-2012.