2008 (8) TMI 365 - HC - Central Excise

Cenvat/Modvat - Whether the Tribunal, in the facts and circumstances of the case, is justified in holding that the demand is highly disproportionate to the credit availed on common inputs which could be attributed to goods which have been cleared without payment of duty? Held that - In the facts and circumstances of the case, it is apparent that the entire controversy has been decided by the Tribunal by merely remitting the matter back to the Adjudicating Authority to re-determine the credit in accordance with law. If any reversal has been made by the respondent-assessee, the same is subject to verification and adjustment if ultimately any further amount is found reversible. According to the respondent-assessee, the exercise directed by the Tribunal has been carried out as recorded in order dated 2-4-2007, which statement is disputed by the learned advocate for the appellant.In the circumstances, in absence of any question of law, as proposed or otherwise, much less a substantial question of law, the appeal is dismissed.

Summary

Issues:
Challenging order of Customs, Excise & Service Tax Appellate Tribunal - Disproportionate demand for duty - Acceptance of offer to reverse credit - Consideration of relevant rules.

Analysis:
The appellant Revenue challenged the order of the Tribunal proposing questions regarding the justification of the demand's proportionality, acceptance of the offer to reverse credit, and consideration of specific rules. The respondent-Company manufactured dutiable products using inputs resulting in both dutiable and non-dutiable products. The Revenue contended that duty was not payable on some final products, leading to a demand for duty payment and reversal of CENVAT credit. Show cause notices were issued, some dropped by the Commissioner, and others confirmed for duty levy. The Tribunal considered the submissions and directed the reversal of the entire credit attributable to the exempted product covered in the nine show cause notices. The Tribunal emphasized re-determining the credit taken on common inputs and accepting the offer to reverse such credit in line with the relevant rules.

The Tribunal's directions aligned with the obligations under the Cenvat Credit Rules, 2002, requiring manufacturers to maintain separate accounts for dutiable and exempted products. If separate accounts are not maintained, conditions for payment are specified. The Tribunal's directions were deemed compliant with the relevant rule, as the respondent agreed to reverse the Cenvat credit. The Tribunal primarily focused on re-determining the credit on common inputs and accepting the offer to reverse such credit related to the nine show cause notices. The Tribunal ensured any further credit reversals would be subject to verification and adjustment if necessary, remitting the matter back to the Adjudicating Authority for compliance.

The Tribunal's decision centered on directing the re-determination and reversal of credits in accordance with the law, with the respondent-assessee undertaking to comply within the specified timeframe. The respondent claimed the directed exercise was completed, disputed by the appellant's advocate. As no substantial question of law was raised, the appeal was dismissed, affirming the Tribunal's decision and the compliance requirements set forth in the judgment.