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2015 (10) TMI 1290 - AT - Central ExciseMODVAT Credit - cum duty benefit - penalty under Rule 173Q - manufacturing of corrugated galvanised sheet from plain galvanised sheet - held that - The order of the Commissioner was not set aside, the matter was sent back only for redetermination keeping in view the cum duty benefit and extending the benefit of modvat credit. In view of the said factual position and keeping in view the Explanation 1 of the Section 11AA as also the observation of the Hon ble Bombay High Court 2009 (10) TMI 257 - BOMBAY HIGH COURT , we are of the view that the appellant is required to pay interest under Section 11AA on the redetermined duty with reference to the date of passing of the first order and not with reference to the passing of impugned order till the date of payment of the said amount As far as the question whether corrugated steel sheets amounts to manufacture or not it has been consistent stand of the Tribunal as also the P&H High Court that the said activity amounts to manufacture. Appellant has not been able to produce any judgment taking a contrary view. The fact that the issue has been remanded by the Hon ble Supreme Court in the case of Vardhaman Industries Ltd. (2008 (3) TMI 51 - SUPREME COURT) is in different context and in any case the Hon ble Supreme Court has not said that the corrugation will not amount to manufacture. Moreover, we find that the said judgment is of 2008 while the dispute in this case pertains to the period of 1997. No judgement passed during 1996 or 1997 has been produced to support the contention. - However, penalty is reduced - Decided in favour of assessee.
Issues Involved:
1. Whether the activity of corrugation amounts to manufacture. 2. Eligibility for MODVAT credit on inputs. 3. Entitlement to cum-duty benefit. 4. Liability to pay interest under Section 11AA of the Central Excise Act. 5. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944. Issue-wise Detailed Analysis: 1. Whether the activity of corrugation amounts to manufacture: The Tribunal confirmed that the activity of corrugation amounts to manufacture. This was based on the consistent view held by the Tribunal and other authorities, including the Punjab & Haryana High Court, that corrugation improves the utility of the raw material and does not alter its essential character. The Tribunal referenced previous decisions such as Bharat Wagon & Engg. v. CCE and noted the Hon'ble Supreme Court's remand in Vardhaman Industries Ltd., which did not definitively rule out corrugation as manufacturing. 2. Eligibility for MODVAT credit on inputs: Since the activity was deemed to be manufacturing, the appellants were entitled to MODVAT credit on the inputs used in the manufacture of corrugated sheets. The Tribunal cited precedents that supported the allowance of MODVAT credit in such situations, provided procedural requirements, such as evidence of duty payment on inputs, were met. The Tribunal remanded the matter to the Commissioner for verification of these documents. 3. Entitlement to cum-duty benefit: The Tribunal also affirmed that the appellants were entitled to cum-duty benefit. This means that the assessable value of the corrugated sheets should be recalculated by deducting the duty element from the sale price. The Commissioner was directed to determine the revised duty amount after considering the cum-duty benefit. 4. Liability to pay interest under Section 11AA of the Central Excise Act: The Tribunal held that the appellants were liable to pay interest on the redetermined duty amount of Rs. 2,62,633 under Section 11AA. The interest was to be calculated from the date of the first adjudication order, not from the date of the impugned order. This decision was based on Explanation 1 to Section 11AA and the interpretation provided by the Bombay High Court in Blue Star Ltd., which clarified that interest on reduced duty amounts relates back to the date of the first determination. 5. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944: The Tribunal upheld the imposition of a penalty under Rule 173Q but reduced the penalty amount from Rs. 1 lakh to Rs. 20,000. The Tribunal found that the appellants had not paid the duty initially despite the consistent view that corrugation amounts to manufacture. The Tribunal dismissed the relevance of the judgments cited by the appellants, such as Sri Durga Hardware Stores and Gujarat Steel Tubes Ltd., as they did not pertain directly to the Central Excise law or the specific issue of corrugation as manufacture. Conclusion: The appeal was dismissed with modifications. The appellants were held liable for interest on the redetermined duty amount and a reduced penalty, affirming the Tribunal's consistent view on the manufacturing status of corrugation and the procedural entitlements under the Central Excise Act and Rules.
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