2024 (1) TMI 669 - AT - Central Excise

Wrongful availment of inadmissible credit - medicaments manufactured by the appellant cleared on payment of duty without availing the benefit of Notification No. 4/2006-CE dated 01.03.2006 - HELD THAT - Going through the said Notification No. 4/2006-CE dated 01.03.2006 and 12/2012-CE dated 17.03.2012, similarly worded, we find that to avail the benefits of said Notifications, it is necessary to fulfill the conditions viz. (i) formulation means medicaments processed out of or containing one or more bulk drugs, with or without the use of any pharmaceuticals aids (such as diluent, disintegrating agents, moistening agent, lubricant, buffering agent, stabilizer or preserver) which are therapeutically inert and do not interfere with therapeutical or prophylactic activity of the drugs, for internal or external use, or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals; and (ii) it shall not include any substance to which the provisions of Drugs and Cosmetics Act, 1940 do not apply. Therefore, the finding of the ld. Commissioner that the said exemption Notification is absolute one, is incorrect. The appellant during the relevant period discharged appropriate duty on the formulations manufactured and cleared from their factory. It is a settled position of law that once the duty has been paid considering the process undertaken resulting into manufacture and attracting duty, Cenvat Credit cannot be denied on inputs/input services if subsequently it is found to be not amounting to manufactured and hence, not excisable. There are no merit in the impugned order - appeal allowed.

Summary

Issues involved: Determination of whether the medicaments manufactured by the appellant, cleared on payment of duty without availing the benefit of a specific notification, disentitles them from availing Cenvat Credit on inputs used in or in relation to the manufacture of the final products.

Facts of the Case: The appellant, engaged in manufacturing medicaments, availed and utilized Cenvat Credit on inputs. Allegations were made that they cleared certain formulations on payment of duty, which were actually exempted under specific notifications, resulting in inadmissible credit. Show cause notices were issued, demands were confirmed, and penalties were imposed. The appeals were filed against these decisions.

Appellant's Argument: The appellant's advocate argued that the products in question were not absolutely exempted as alleged. They contended that compliance with specific conditions was necessary for the exemption, which was not fulfilled in this case. They also cited legal precedents to support their position, emphasizing that once duty is paid on final products, the credit on inputs cannot be denied.

Revenue's Position: The Revenue reiterated the findings of the Commissioner, stating that since the appellant was entitled to an absolute exemption, availing Cenvat Credit on inputs was not permissible. They supported the decision to recover the credit with interest and penalty.

Judgment: The Tribunal examined the conditions of the exemption notifications and found that they were not absolute but conditional. It was noted that the appellant had paid duty on the formulations manufactured and cleared. Citing legal precedents, the Tribunal concluded that once duty is paid on products considered dutiable, the denial of credit on inputs is not justified. Therefore, the impugned order was set aside, and the appeals were allowed.

Decision: The Tribunal ruled in favor of the appellant, highlighting the conditional nature of the exemption notifications and emphasizing the principle that once duty is paid on dutiable products, denial of credit on inputs is unwarranted. The appeals were allowed, and the impugned order was set aside.