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2019 (3) TMI 1225 - HC - Central ExciseCENVAT Credit - common inputs used for both dutiable and exempted products - non-maintenance of separate records - contravention of provisions of section 57CC of Central Excise Rules, 1944 - non-application of mind - Held that - This Court holds that at this stage, it is not possible to consider the matter in detail as from the nature of order made by CESTAT, it can be said that necessary material is not considered by the CESTAT and there was non application of mind. The matter is remanded back for fresh decision which needs to be given after considering the relevant material and CESTAT is expected to give reasoned order in respect of the material available against the assessee - Appeal allowed by way of remand.
Issues involved:
1) Challenge to the order of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) by a manufacturing company regarding the imposition of liability for availing modvat credit on common inputs used for manufacturing both dutiable and exempted products. 2) Dispute over the maintenance of separate inventory and accounts for common inputs used in manufacturing. 3) Allegations of intentional evasion of duty by not paying 8% on exempted products and not complying with the provisions of Section 57CC of Central Excise Rules, 1944. 4) Interpretation of Rule 57CC and Rule 57A of Central Excise Rules, 1944 regarding the availing of modvat credit on common inputs. 5) Consideration of past judgments and legal precedents related to similar cases of contravention of Central Excise Rules. Detailed Analysis: 1) The appeal was filed against the order of the Commissioner of Central Excise and Customs by a manufacturing company engaged in producing medicines falling under Chapter 30 of the Central Excise Tariff Act, 1944. The company availed modvat credit on common inputs used for both dutiable and exempted products. The investigation revealed that the company did not maintain separate inventory or accounts for these common inputs, leading to allegations of intentional evasion of duty. 2) The Commissioner found instances where the company had not maintained separate inventory and had transferred inputs directly from common Bin Cards to those specific to exempted products. The Commissioner concluded that this practice was misleading and indicated an intention to evade duty, especially by not paying the required 8% on exempted goods. The company defended itself by claiming to have reversed a portion of the modvat credit taken on common inputs and argued that there was no malafide intent behind the procedural mistakes. 3) The Commissioner's order imposing a liability of ?95,81,672 was challenged before CESTAT, which ruled in favor of the company based on the reversal of credit on common inputs before using them for exempted goods. However, the High Court observed that CESTAT did not consider relevant material and did not apply its mind adequately, leading to the setting aside of CESTAT's order and remanding the matter back for a fresh decision. 4) The legal arguments revolved around the interpretation of Rule 57CC and Rule 57A of the Central Excise Rules, 1944, regarding the availing of modvat credit and the obligation to pay 8% on exempted products. References were made to past judgments and legal precedents to support both sides of the argument, emphasizing the importance of maintaining proper records and compliance with the Central Excise Rules. 5) The High Court highlighted the need for a reasoned order considering all relevant material by CESTAT in such cases involving the availing of modvat credit on common inputs and the implications of non-compliance with the Central Excise Rules. The judgment underscored the importance of maintaining accurate records and complying with the legal provisions to avoid allegations of duty evasion and ensure fair assessment of liabilities.
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