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2021 (9) TMI 1029 - AT - Central ExciseMODVAT Credit - inputs removed as such against CT-3 certificates to 100% EOU - benefit of N/N. 1/95-CE dated 4.1.1995 denied on the ground that assessees have not manufactured the inputs in their factory and therefore not entitled to the exemption as per the notification - HELD THAT - The issue stands settled by the decision of the Hon'ble High Court of Karnataka in the case of THE COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II VERSUS M/S SOLECTRON CENTUM ELECTRONICS LTD. 2014 (10) TMI 596 - KARNATAKA HIGH COURT where it was held that if the assessee had purchased those inputs for its EHTP unit by virtue of aforesaid Notification, there was no duty payable, as the said inputs were removed with the previous permission of the department as reflected in CT-3. The said decision was applied by the Tribunal in the case of M/S. LAKSHMI AUTOMATIC LOOM WORKS LTD. VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, COIMBATORE 2021 (9) TMI 35 - CESTAT CHENNAI . The Hon'ble High Court of Madras in the judgment by which the matter was remanded has referred the said decision in Solectron Centum Electronics Ltd. with approval and also directed the Tribunal to consider the applicability of the said judgment. The issue raised and analyzed in the case of Solectron Centum Electronics Ltd. is identical and squarely applicable to the issue for consideration. The demand of duty on inputs removed as such to 100% EOU cannot sustain - Appeal allowed - decided in favor of assessee.
Issues:
1. Liability of the assessee to pay duty on inputs with MODVAT credit removed to 100% EOU. Analysis: The case involved an appeal regarding the liability of the assessee to pay duty on inputs with MODVAT credit removed to a 100% EOU. The Tribunal had earlier held the assessee liable to pay duty, which was challenged by the assessee in the Hon'ble High Court. The High Court remanded the matter back to the Tribunal for fresh consideration, referring to a judgment in a similar case. The central issue was whether the assessee was obligated to pay duty on such inputs. The facts revealed that the assessee, engaged in manufacturing CNC lathes machines and parts, availed MODVAT facility and removed some inputs without payment of duty under an exemption notification. The department contended that the assessee did not meet the conditions of the notification, as the inputs were not manufactured in their factory. Show Cause Notices were issued, and the original authority ruled against the assessee. Appeals were filed, resulting in contradictory decisions by the Commissioner (Appeals). The Tribunal analyzed the relevant Notification No. 1/95-CE, which exempted excisable goods for use in export-oriented undertakings. The department argued that the inputs were not procured as per the notification's conditions. However, the Tribunal found the department's interpretation contrary to the notification's purpose, which aimed to extend benefits to 100% EOUs. A circular clarified that inputs could be cleared without duty for exports, treating them as manufactured within the factory. Referring to the judgment in Solectron Centum Electronics Ltd., the Tribunal concluded that the demand for duty on inputs removed to 100% EOU was not sustainable. The decision in Lakshmi Automatic Loom Works Ltd. supported this interpretation. The Tribunal upheld the appeals of the assessee, setting aside the demand for duty, interest, and penalties, while dismissing the department's appeals. In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the application of relevant notifications and legal precedents in determining the liability for duty on inputs removed to 100% EOU.
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