2018 (3) TMI 252 - AT - Central Excise

N/N. 22/2003-CE - Department took the view that the exemption benefit of these notifications would only be availed in respect of goods manufactured by an assessee whereas it appeared that the impugned goods were only imported or otherwise locally procured by the appellants and supplied as such to the EOUs - Held that - the very same goods, which are cleared by the appellant to the EOU or towards supply of ICB, when such goods are cleared to the DTA, the department has accepted the payment of duty made by the appellant on the transaction value and on such DTA clearances have not demanded debit of the corresponding amount of CENVAT credit availed in respect of those good. This fact has been taken note of by the subsequent appellate orders produced by the ld. Consultant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of exemption notifications for industrial valves and items
2. Availment of CENVAT credit on inputs cleared to EOUs and ICB
3. Imposition of penalties under various provisions of law
4. Consideration of activities like calibration, testing, assembly as manufacturing
5. Submission of documentary evidence for activities carried out on inputs
6. Reliance on previous appellate orders for similar issues
7. Application of judgment of Hon’ble High Court of Karnataka
8. Verification report indicating lack of manufacturing activity
9. Discrepancy in department's treatment of goods cleared to EOUs, ICB, and DTA
10. Consistency in payment of duty on transaction value for DTA clearances

Analysis:
1. The case involved the interpretation of exemption notifications related to the clearance of industrial valves and items by the appellants to Export Oriented Units (EOUs) and for supply against International Competitive Bidding (ICB). The Department contended that the exemption benefit of these notifications applied only to goods manufactured by the assessee, raising a demand for CENVAT credit availed on inputs cleared for both purposes.

2. The original authority confirmed the demand and imposed penalties, which was upheld by the Commissioner (Appeals). The appellant challenged this decision in the appeal, arguing that activities like calibration, testing, and assembly on the impugned goods should be considered manufacturing activities. However, the lack of documentary evidence to support these activities was noted as a fault by the Commissioner (Appeals).

3. The appellant's consultant referenced previous appellate orders in their favor for subsequent periods on the same issue. They also relied on a judgment of the Hon’ble High Court of Karnataka related to the removal of inputs and capital goods to EHTP unit under CT3, emphasizing that the appellant should not be liable to pay credit in such cases.

4. The Department, represented by the Assistant Commissioner, supported the impugned order, highlighting a verification report indicating the absence of manufacturing activity in the appellant's factory. Both sides presented their arguments, and the Tribunal examined the case records.

5. The Tribunal found inconsistencies in the Department's treatment of goods cleared by the appellant to EOUs, ICB, and Domestic Tariff Area (DTA). Noting that duty was paid on transaction value for DTA clearances without demanding a debit of corresponding CENVAT credit, the Tribunal ruled in favor of the appellant. The judgment emphasized the Department's inability to take a different stand for identical goods cleared to different entities and set aside the impugned order, allowing the appeal with consequential benefits as per law.