2013 (12) TMI 757 - AT - Central Excise

Duty demand on bulk drugs - Extended Period of limitation Held that - Suppression of relevant facts with intent to evade payment of duty was clearly alleged in the show-cause notice and the proviso to Section 11A (1) of the Act was specifically invoked - assessee had violated Rule 8 of the CER 2002 by not paying duty on or before 6th June 2004 on the goods cleared from their factory to Dr. Reddys Laboratories on 18.05.2004 and 21.05.2004 - even after 06.06.2004, the default continued - The plea of revenue-nuetrality emanates from the fact that Dr. Reddy s Laboratories chose to pay the appropriate duty while returning the goods to the appellant on 10.06.2004 - An assessee who defaulted payment of duty by violating Rule 8 has to be held to have not paid duty on the goods - when the duty-paid goods were received from Dr. Reddy s Laboratories, it was open to the appellant to take CENVAT credit thereof, a course allowed by the law - If the appellant did not opt to enjoy that benefit, the Revenue cannot be prejudiced - Decided against Revenue. Denial of Cenvat credit under Rule 6 (1) of the CENVAT Credit Rules 2004 Inputs procured used in job-work which is exempted final product - Benefit of Notification No. 214/86-CE - Held that - Any job-worked goods cleared without payment of duty under Notification No. 214/86-CE cannot be said to be exempted goods for purposes of the Rule - There is no other ground to deny the credit to the appellant thus the denial of the credit to the appellant by the lower authorities is unsustainable in law further there can be no penalty on the appellant - Decided in favour of Assessee. Courier Service is Input service or not - Denial of Cenvat credit on certain services Services claimed as input service or not under Rule2 (1) of Cenvat credit rules 2004 - Held that - Following COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others 2011 (3) TMI 248 - KARNATAKA HIGH COURT - Where the final products are exported, the port of export is the place of removal - the courier service would qualify to be input service in terms of Rule 2(l) of the CCR 2004 as it was used for transportation of the goods from the factory to the port of export - the credit is admissible and the demand and the penalty set aside - Decided in favour of Assessee.

Summary

Issues:
1. Demand of Central Excise duty on bulk drugs
2. Denial of CENVAT credit for inputs used in job-work
3. Denial of CENVAT credit for courier service

Analysis:

1. Demand of Central Excise duty on bulk drugs:
The appellant was demanded Rs. 87,048 as Central Excise duty on bulk drugs cleared to a buyer without payment of duty. The appellant argued for revenue-neutrality and time-bar defense. The tribunal rejected the arguments, citing violation of Rule 8 of the Central Excise Rules 2002. The appellant's failure to pay duty and disclose the default led to the demand being upheld. The tribunal also clarified that the appellant could have claimed CENVAT credit when the goods were returned by the buyer, but they did not. Therefore, the demand for duty, interest, and penalties was upheld.

2. Denial of CENVAT credit for inputs used in job-work:
The denial of CENVAT credit of Rs. 9,600 was based on the job-worked goods being cleared without payment of duty. The tribunal held that the denial under Rule 6(1) of the CENVAT Credit Rules 2004 was unsustainable as the goods were cleared under a notification and not as exempted goods. The denial of credit was deemed legally unsustainable, and no penalty was imposed on the appellant in this regard.

3. Denial of CENVAT credit for courier service:
The denial of CENVAT credit of Rs. 53,277 on courier service was challenged by the appellant, arguing that the service qualified as an input service for export of final products. The tribunal agreed, citing case law and precedent that supported the appellant's claim. The service was considered an input service under Rule 2(l) of the CENVAT Credit Rules 2004, and the denial of credit was set aside. Consequently, the demands and penalties related to this issue were also set aside.

In conclusion, the appeal was allowed except for the demand of duty of Rs. 87,048 and related interest and penalties. The judgment provided detailed reasoning for each issue, ensuring a comprehensive analysis of the legal aspects involved in the case.