2005 (1) TMI 198 - AT - Central Excise

Cenvat/Modvat - Inputs for manufacture of machineries - Precedents - Penalty - Payment of duty - CT3 Certificate issued by a 100% Export Oriented Unit - Modvat credit initially availed of - HELD THAT - As in the present matters the 100% EOUs have not purchased the excisable goods directly from the factory of manufacture and only from the assessee who has obtained them from the factory of manufacture and has availed of Modvat credit, the condition specified in the Notification has not been complied with and accordingly the benefit of Notification No. 1/95-C.E. is not available to the impugned goods cleared by the assessee. Accordingly they are liable to pay the duty. This was also the decision of the Tribunal in the case of Sidhartha Tubes Ltd. v. CCE, Indore - 2002 (148) E.L.T. 796 (T). Whether the duty payable by the assessee will be equivalent to the amount of Cenvat credit initially taken by them - There is no force in the submission of the ld. Advocate that as the assessee is not the manufacturer no new rate of duty or value can be determined for the purpose of levying the duty. The reason is very clear because the assessee has been made eligible to bring the inputs and take the Cenvat credit of the duty paid on the inputs subject to condition that the inputs are used in or in relation to the manufacture of the final product. If the assessee wants to remove the inputs as such, they have to comply with the condition specified in the Rules. If they are not willing to comply to the condition of the rule for removal of the goods as such they should use the inputs for the purpose these were brought into factory that is in the manufacture of their final product. The decision of the Tribunal in the case of Eicher Tractors v. CCE 2004 (5) TMI 442 - CESTAT, NEW DELHI , upon by the ld. Advocate is not applicable in view of the decision of the Apex Court in the case of Alnoori 2004 (7) TMI 91 - SUPREME COURT . We agree with the ld. Advocate that as the issue involved in these appeals relates to interpretation of the provisions of Cenvat Credit Rules no penalty is imposable. We hold that no penalty is imposable on the appellants in any of the appeals. The demand of duty against the assessee is upheld. All the appeals are disposed of in the above terms.

Summary

Issues involved: Whether M/s. Lakshmi Machine Works are eligible to clear inputs without payment of duty against a CT3 Certificate issued by a 100% Export Oriented Unit and whether duty payable is required to be equivalent to Modvat credit initially availed of.

Details of the Judgment:

Issue 1: Eligibility to clear inputs without payment of duty
The appellant contended that as per Rule 57AB of the Central Excise Rules, 1944, when inputs are removed as such, the assessee shall be deemed manufacturer and eligible to remove the same without duty against a CT-3 Certificate. Referring to a Board's Circular, the appellant argued that the Modvat credit can be utilized for export of inputs without reversal of credit. However, the respondent argued that Rule 57AB enables the collection of duty on inputs cleared as such to a 100% EOU. The Tribunal held that since the 100% EOUs did not procure goods directly from the factory of manufacture, the benefit of the Notification was not available, and the appellant was liable to pay duty.

Issue 2: Duty payable equivalent to Modvat credit
The Tribunal referenced the decision in Asia Brown Boveri Ltd., stating that duty payable should not be less than the credit allowed on inputs. However, post-amendment of Rule 57AB and introduction of Cenvat Credit Rules, 2001, the provisions changed. The Tribunal emphasized that duty must be paid based on the rate applicable on the date of removal and value determined under the Act. The appellant's argument that no new rate or value can be determined as they are not the manufacturer was dismissed. The Tribunal held that the duty must be paid as per the provisions of the Cenvat Credit Rules. No penalty was imposed on the appellants, and the demand for duty was upheld.

In conclusion, the Tribunal ruled in favor of the Revenue, holding that the appellants were not eligible to clear inputs without duty against CT-3 Certificate and were liable to pay duty equivalent to the Modvat credit initially availed of. The decision of the Larger Bench in Asia Brown Boveri Ltd. was deemed inapplicable post-amendment, and duty had to be paid as per the Cenvat Credit Rules.