2014 (8) TMI 88 - AT - Central Excise

Cenvat Credit - manufacturing of Supari - Supari has to be considered as non-excisable - Held that - In the case of Narmada Chematur Pharmaceuticals Ltd. (2004 (12) TMI 93 - SUPREME COURT OF INDIA), the Honble Supreme Court held that the amount of cenvat / modvat credit wrongly availed is exactly equivalent to the amount of excise duty paid by not availing the exemption, the consequence is revenue neutral and hence demand for such wrong availment of credit rightly quashed by the Tribunal. - Decided in favor of assessee.

Summary

Issues:
Cenvat credit on inputs for Supari manufacturing, classification of Supari, eligibility of cenvat credit, revenue neutrality.

Analysis:
The case involved the appellants engaged in Supari manufacturing under Chapter Sub-heading No. 2106.90 of the Central Excise Tariff Act, 1985. A show cause notice was issued to deny cenvat credit wrongly availed for duty payment on Supari, considered non-excisable based on a High Court order. The adjudicating authority dropped the proceedings, but the Revenue appealed. The Commissioner (Appeals) set aside the adjudication order, prompting the appellant's appeal.

Upon hearing, it was found that the final product Supari was not dutiable as per a Supreme Court decision. The Commissioner (Appeals) held that availing cenvat credit on inputs for Supari was not permissible. However, paying duty on the final product, even if not amounting to manufacturing, and availing cenvat credit, resulted in a revenue-neutral situation, as established by various court decisions.

The appellant cited relevant cases such as CCE, Vadodara Vs. Narmada Chematur Pharmaceuticals Ltd., CCE, Ahmedabad Vs. Narayan Polyplast, among others, which supported the concept of revenue neutrality in cases of wrong availment of cenvat credit. The Tribunal, following the Supreme Court's decisions, observed that paying duty on the final product reversed the entire cenvat credit, leading to revenue neutrality. Since the appellant paid duty on Supari and did not claim a refund, the situation was deemed revenue-neutral. Consequently, the impugned order by the Commissioner (Appeals) was set aside, and the appeal was allowed with consequential relief.

In conclusion, the judgment clarified the eligibility of cenvat credit for Supari manufacturing, the classification of Supari as non-excisable, and the concept of revenue neutrality in duty payment situations. The decision was based on established legal principles and previous court rulings, ensuring a fair resolution in favor of the appellant.