2023 (3) TMI 125 - AT - Central Excise

Revocation of registration under Central Excise - allegation of on-existent manufacturing facility to operate as a central excise assessee and claim benefits arising therefrom. - Import of goods against the Entitlement for Duty free entitlement credit certificate (DFECC) - absence of factory address in the bills of entry - N/N. 53/2003-Cus dated 1st April 2003 - HELD THAT - We may, at the outset, decline to have anything to do with propriety of import, or adherence to obligations devolving, under duty free entitlement credit certificate (DFECC) scheme in the Foreign Trade Policy (FTP), operationalized through notification no. 53/2003-Cus dated 1st April 2003, as the lack of jurisdiction with the lower authorities precludes our jurisdictional competence too. There is no evidence of proceedings having been initiated under Customs Act, 1962 It is no less surprising that the exercise of revocation has been undertaken by the tax authorities for recovery of credit, taken under CENVAT Credit Rules, 2004, of duty discharged by the appellant at the time of import and utilised towards partial discharge of duty liability arising on clearance of goods; it does not appear to us that there is sound logic in appellant choosing to discharge duty liabilities, at different stages, on goods that were ultimately to be exported and to be unduly benefited from the exchequer when all that was sought to be reimbursed were the very same duties that were eligible to be neutralised upon exports. Revocation of registration, not provided for in Central Excise Rules, 2002 and only in exercise of power of Central Board of Excise Customs (CBEC) to specify conditions, safeguards and procedure in rule 9(3) of Central Excise Rules, 2002, can be triggered only within the rigour therein and with discharge of duty liability certainly not being breach of Act or Rules, the revocation upheld by the first appellate authority is not valid in law. Duty on final product having been discharged by the appellant, and not excluded, by any stretch, from the definition of manufacture applied to the taxable event in section 3 of Central Excise Act, 1944, denial of CENVAT credit by the original authority in the order impugned here, as held in COMMISSIONER VERSUS CREATIVE ENTERPRISES 2009 (7) TMI 1206 - SC ORDER , does not have sanction of law. Appeal allowed.

Summary

Issues Involved:
1. Eligibility of a non-existent manufacturing facility to operate as a central excise assessee.
2. Legality of revocation of registration under Central Excise Rules, 2002.
3. Recovery of CENVAT credit availed by the appellant.
4. Compliance with the Foreign Trade Policy (FTP) and related notifications.
5. Validity of the appellant's claim for rebate under Central Excise Rules, 2002.

Detailed Analysis:

1. Eligibility of a Non-Existent Manufacturing Facility:
The primary issue revolves around whether the appellant, operating without a physical manufacturing setup, can be considered a central excise assessee and claim related benefits. The central excise authorities argued that the appellant's facility lacked machinery, employees, and energy consumption records, suggesting it was non-operational. The appellant countered by stating they had leased premises, completed procedural requirements, and intended to install machinery but opted for job work as allowed under rule 4 of CENVAT Credit Rules, 2004.

2. Legality of Revocation of Registration:
The authorities revoked the appellant's registration, arguing non-conformity with the definition of "manufacture" under section 2 of the Central Excise Act, 1944. The appellant contended that their activities, including testing and inspection, fell within the statutory definition of manufacture. The tribunal noted that revocation under rule 9(3) of the Central Excise Rules, 2002, is permissible only for breaches of the Act or rules, which was not established in this case. Therefore, the revocation was deemed invalid.

3. Recovery of CENVAT Credit:
The authorities sought to recover Rs. 2,78,77,385 availed as CENVAT credit, asserting the appellant's ineligibility. The appellant argued that they had discharged duty on the final product and complied with job-work procedures. The tribunal referenced the case of Creative Enterprises, where it was held that if duty is levied, Modvat credit cannot be denied even if the activity does not amount to manufacture. Consequently, the tribunal found no legal basis for denying the CENVAT credit.

4. Compliance with Foreign Trade Policy (FTP) and Related Notifications:
The authorities claimed that the appellant illicitly transferred goods meant for import under notification no. 53/2003-Cus, which should be used by the actual user holding the appropriate authorization. The tribunal, however, clarified that compliance with FTP and related notifications falls outside the jurisdiction of central excise authorities. There was no evidence of proceedings under the Customs Act, 1962, against the appellant, thus rendering this argument moot.

5. Validity of the Appellant's Claim for Rebate:
The appellant claimed rebate under rule 18 of the Central Excise Rules, 2002, for goods exported after payment of duty. The authorities argued that the appellant's payments were merely deposits, not actual duty payments. The tribunal disagreed, stating that the appellant's discharge of duty liability and compliance with job-work procedures entitled them to the rebate. The tribunal emphasized that the complexity of the appellant's commercial operations did not justify denying their legal entitlements.

Conclusion:
The tribunal set aside the impugned orders, allowing the appeals. The appellant's eligibility as a central excise assessee, the legality of their registration, and their entitlement to CENVAT credit and rebate were upheld. The authorities' actions were found to lack legal sanction, and the appellant's compliance with relevant procedures was affirmed.

Order Pronounced:
The judgment was pronounced in open court on 23/02/2023.