2007 (9) TMI 156 - AT - Central Excise

Final product Poly Vitamin B Complex Syrup classified under Ch. 30 was challenged by dept. on ground of alcohol content in the impugned good - Held that once duty has been paid on the inputs & it has been consumed in mfg. of dutiable final product input stage credit cannot be denied

Summary

Issues:
1. Classification of product under Chapter 30 of Central Excise Tariff Act, 1985.
2. Availment of Cenvat credit on inputs used in the final product.
3. Allegations of misclassification by the appellant.
4. Dispute over duty liability on the final product.
5. Applicability of Chapter Note 4 of Chapter 30 of the Central Excise Tariff Act, 1985.

Analysis:
1. The case involves a dispute regarding the classification of the product 'Polybion Vitamin B Complex Syrup' under Chapter 30 of the Central Excise Tariff Act, 1985. The appellant, a manufacturer of pharmaceutical goods, contended that they followed instructions from M/s Cradel Pharmaceuticals Pvt. Ltd. to classify the product under Chapter 30 and cleared it on payment of duty. The revenue alleged intentional misclassification to avail Cenvat credit on inputs.

2. The main issue revolves around the eligibility of Cenvat credit on inputs used in the final product. The appellant argued that since duty was paid on the final product during the relevant period, they should not be required to reverse the Cenvat credit. The revenue claimed that the appellant misused the credit on inputs for a non-excisable final product.

3. The appellant's defense included citing relevant case laws such as Systematic Steel Industries Ltd. and PSL Holding Ltd. to support their contention that as long as the final product is cleared on payment of duty, the input stage credit should not be denied. The revenue, however, argued that the facts of this case differ from those in the cases cited by the appellant.

4. The judgment highlighted that the appellant, as a lone licensee of M/s Cradel Pharmaceuticals Pvt. Ltd., had no knowledge that the final product might be excluded under Chapter Note 4 of Chapter 30 of the Central Excise Tariff Act, 1985. The revenue authorities themselves tested the final product and found an alcohol content of 0.26%, indicating a lack of awareness regarding the product's composition.

5. The Tribunal referenced the decision in Systematic Steel Industries Ltd. and the judgment of the Hon'ble High Court of Madras to conclude that once duty has been paid on inputs consumed in the manufacturing of a dutiable final product, the denial of input stage credit is unwarranted. Consequently, the impugned order was set aside, and both appeals were allowed with any consequential relief.

This detailed analysis provides insights into the legal issues, arguments presented by both parties, relevant case laws, and the Tribunal's reasoning leading to the judgment's conclusion.