2017 (2) TMI 886 - AT - Central Excise

Reversal of credit / payment of duty - removal of inputs as such - Valuation - when the inputs or capital goods, on which the credit has been taken are cleared as such from the factory, whether the manufacturer of final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal? - Held that - the concept of deemed manufacture is only for the purpose of procedure to be followed for removal of input since the removal of input also attracts duty - But it is the fact that the input is not manufactured by the appellant whereas the same is manufactured by the supplier therefore as regard the concept of valuation and rate of duty of the input for the purpose of charging duty, it is that value and rate of duty which was applicable to the manufacturer supplier of the input. Merely because deeming fictions is given in rule for the purpose of procedure it does not empower to Revenue to charge the duty over and above the duty equivalent to the Cenvat Credit availed - duty paid by the removal of inputs is in order - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Rule 57AB(1C) of Central Excise Rules, 1944 and Rule 3(4) of Cenvat Credit Rules, 2001/2002 regarding duty payment on removal of input as such.

Detailed Analysis:

1. Interpretation of Rule 57AB(1C) and Rule 3(4):
The appellant availed Cenvat Credit on inputs cleared on payment of duty during a specific period. The dispute arose regarding the duty payment on the removal of input as such. The lower authority contended that duty should be paid as if the input was manufactured by the appellant, citing Rule 57AB(1C) and Rule 3(4) of the relevant excise rules. These rules required payment of duty equal to the excise duty leviable on such goods at the applicable rate on the date of removal. The appellant challenged this interpretation.

2. Appellant's Argument:
The appellant argued that duty should only be paid on the amount equal to the Cenvat credit availed on the inputs, regardless of any additional charges recovered. Reference was made to various judgments, including a Larger Bench decision upheld by the Supreme Court, supporting the appellant's position. The appellant contended that the duty payable remains constant irrespective of other charges collected.

3. Revenue's Argument:
The Revenue argued that the provisions necessitate treating the removal of input as if it was manufactured by the assessee, thereby applying all relevant provisions for manufactured goods, including valuation and duty rate. Several judgments were cited to support this interpretation, emphasizing that duty should be based on the transaction value of the input.

4. Decision and Rationale:
The Tribunal analyzed the provisions of Rule 57AB(1C) and Rule 3(4) to determine the appropriate duty payment on the removal of input as such. It was clarified that the concept of deemed manufacture is procedural and does not alter the fact that the input was not manufactured by the appellant. The duty payable should be equivalent to the Cenvat credit availed, aligning with the judgments cited by the appellant. The Tribunal emphasized that the duty paid by the removal of inputs was in order, overturning the lower authority's decision. The appeal was allowed based on the precedent set by the Larger Bench decision upheld by the Supreme Court.

In conclusion, the Tribunal's judgment clarified the duty payment requirements on the removal of input as such, emphasizing that the duty should be based on the Cenvat credit availed and not on additional charges or the procedural concept of deemed manufacture.