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2020 (2) TMI 441 - AT - Central ExciseCENVAT Credit - scope of SCN - process amounting to manufacture - allegation that the Appellants had not paid additional excise duty at each stage of manufacture of fabrics i.e. bleaching, dyeing and printing, which then subjected to captive consumption - HELD THAT - This Tribunal, while remanding the matter to the learned Commissioner (Appeals), directed him to consider the benefit of MODVAT Credit and export benefit admissible to them. In the remand proceedings, the learned Commissioner (Appeals), though allowed MODVAT benefit relating to the process of bleaching and dyeing, but denied credit to the process of printing, observing that no further process thereafter being carried out, hence the Appellants are not eligible. The demand has been calculated alleging that the Appellant had failed to discharge the duty at each stage of manufacture i.e. bleaching, dyeing and printing. In other words, while proposing to recover duty, the process of printing was also considered as a process of manufacture. Therefore, denying credit holding that the process of printing does not amount to manufacture, is contrary to the very basis of show cause-cum-demand notice, hence, cannot be sustained. Credit allowed - appeal allowed - decided in favor of appellant.
Issues:
- Denial of MODVAT Credit and export benefit to the Appellant. - Consideration of printing process as part of the manufacturing process. - Admissibility of duty payment at each stage of manufacture. Analysis: 1. Denial of MODVAT Credit and export benefit to the Appellant: The Appellant, a textile mill engaged in manufacturing fabrics, faced a demand notice for not paying additional excise duty at each stage of fabric manufacture, including bleaching, dyeing, and printing. The Appellant contended that they were entitled to CENVAT Credit on inputs at each stage of manufacture. The Tribunal noted that the Appellant was denied the benefit of exemption notifications but allowed MODVAT Credit for bleaching and dyeing stages. However, the credit for the printing process was denied by the learned Commissioner (Appeals) on the grounds that no further process occurred after printing. The Tribunal disagreed with this reasoning, stating that the demand notice considered printing as part of the manufacturing process. Consequently, the Tribunal found the denial of MODVAT Credit for printing unjustified and allowed a credit of ?34,84,249 to the Appellant. 2. Consideration of printing process as part of the manufacturing process: The Tribunal highlighted that the show cause notice alleged the Appellant's failure to discharge duty at each stage of fabric manufacture, including printing. Therefore, treating printing as a manufacturing process was integral to the duty recovery proposal. The Tribunal deemed the denial of credit for the printing process, based on the absence of further processes post-printing, as contradictory to the initial demand notice's premise. Consequently, the Tribunal ruled in favor of the Appellant, emphasizing that the denial of credit for the printing stage was unsustainable. 3. Admissibility of duty payment at each stage of manufacture: The Appellant's case revolved around the duty payment obligation at various fabric manufacturing stages. The Tribunal observed that the Appellant was initially required to pay duty at each manufacturing stage, as per the demand notice. Despite the denial of exemption benefits, the Appellant's entitlement to CENVAT Credit was acknowledged for certain stages. The Tribunal's decision to allow the MODVAT Credit for printing, in addition to bleaching and dyeing, reinforced the Appellant's position regarding duty payment obligations and credit entitlements at different manufacturing stages. Ultimately, the Tribunal modified the impugned order to allow the Appellant's appeal concerning the MODVAT Credit issue. In conclusion, the Tribunal's judgment favored the Appellant by overturning the denial of MODVAT Credit for the printing process, emphasizing the integral role of printing in the fabric manufacturing process as per the initial demand notice. The decision underscored the importance of considering all manufacturing stages for duty payment and credit entitlements, ensuring a fair and consistent application of excise duty regulations.
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