2018 (7) TMI 235 - AT - Central Excise

Self-credit of excise duty refundable under N/N. 20/2007-CE - activity of shifting of control samples from the production floor to the sample storage room - deemed removal - whether control samples have been cleared for the purpose of N/N. 20/2007-CE? - Held that - N/N.20/2007-CE grants exemption to all the goods manufactured and cleared from a unit located in the states of Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland and Sikkim. Accordingly, the manufacturing unit in the state of Assam is eligible for the exemption under the said Notification. It is pertinent to note that explanation II to Rule 4(3) of the Central Excise Rules states that putting the manufactured goods for any use within the factory of production for manufacture of any other commodity i.e. captive consumption, amounts to deemed removal of goods. Accordingly, the liability of excise duty arises even where the goods manufactured are used within the factory of production. Cenvat Credit cannot be denied to the appellant assessee when the department has accepted the duty paid on control samples. Appeal allowed - decided in favor of appellant.

Summary

Issues: Applicability of Notification No.20/2007-CE for exemption, determination of deemed removal of control samples, eligibility for remission under Rule 21 of Central Excise Rules, 2002, violation of Rule 3(4) of Cenvat Credit Rules, 2004.

Analysis:

1. Applicability of Notification No.20/2007-CE:
The appellant, engaged in manufacturing malted milk food, availed self-credit of excise duty refundable under Notification No.20/2007-CE for goods cleared. The issue arose regarding the treatment of control samples drawn from finished products for analysis. The Tribunal analyzed whether the control samples, even if destroyed within the factory premises after 15 months, constituted clearance for the purpose of the said notification. The Tribunal noted that the liability to pay duty arises upon removal of excisable goods from the factory premises, and deemed removal within the factory also attracts excise duty. The manufacturing unit in Assam was eligible for exemption under the notification, and the control samples being used within the factory did not negate the liability to pay duty.

2. Deemed Removal and Remission Eligibility:
The appellant considered shifting control samples to the sample storage room as deemed removal of goods and paid excise duty accordingly. The appellant argued that they should be eligible for remission under Rule 21 of the Central Excise Rules, 2002, as the control samples were destroyed after 15 months. The Tribunal agreed that the control samples' destruction within the factory premises could warrant remission. The appellant contended that they suffered a loss by not opting for remission due to the limitation of re-credit at 36%. The Tribunal considered the appellant's loss due to excise duty payment, credit reversal, and remission, ultimately allowing the appeal.

3. Violation of Cenvat Credit Rules:
The appellant's claim of self-credit under Notification No.20/2007-CE was challenged for allegedly violating Rule 3(4) of the Cenvat Credit Rules, 2004. The appellant argued that the said notification was not listed under Rule 3(4), thus the proviso to the rules did not apply. The Tribunal found that the department's contention that no duty was payable on control samples was incorrect, and the appellant's utilization of Cenvat credit was justified since duty was paid on the samples.

In conclusion, the Tribunal set aside the impugned orders, allowing the appeal filed by the appellant, emphasizing the correct application of excise duty provisions, remission eligibility, and Cenvat credit utilization in the context of control samples within the factory premises.