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2015 (4) TMI 387 - HC - Central ExciseClandestine removal of goods - Whether Tribunal was right in granting the benefit of duty exemption under Notification No. 3/2001C. E. Dated 1.3.2001 to assessee since it has not fulfilled the inbuilt condition no. 41 of the notfn. i.e. the assessee has not reversed the Cenvat Credit availed on certain inputs like glasses, paints etc. used in the manufacture of vehicles before availing the said exemption - Held that - if the said goods or products, if manufactured out of chassis falling under Heading No. 87.06 on which duty of excise has been paid and no credit of duty paid on such chassis and other inputs used in the manufacture of such vehicle has been taken under rule 57AB or rule 57AK of the Central Excise Rules, 1944, the exemption is admissible. - this was an admitted position of a clandestine removal. There was no payment of excise duty by the manufacturer on excisable goods. The payment was not made by claiming exemption and entitlement under Notification No. 3/2001C. E. which is a conditional exemption. This is a case of admitted Modvat Credit taken on glasses used in the manufacture of buses and tempo travelers. The Assessee did not reverse the Modvat Credit at the time of removal of goods or after removal. No efforts were made by the Assessee to reverse the same. In the circumstances, when there is an admitted position emerging from the record, we are of the view that the Tribunal erred in law in reversing such a conclusion in the order-in-original. Assessee admits taking of credit and contrary to the condition No. 41 of the Exemption Notification, which enables it to claim or remove the goods at nil duty. Knowing fully well, the Assessee could not have availed of the benefit of such exemption Notification. The activity or process in this case amounts to manufacture is undisputed. That the goods have been removed without payment of duty is the conclusion reached in the order-in-original. Such a conclusion, which was not perverse and neither vitiated in law should not have been interfered with by the Tribunal. - Decided in favour of Revenue.
Issues Involved:
1. Entitlement to duty exemption under Notification No. 3/2001 C.E. 2. Reversal of Modvat Credit. 3. Alleged clandestine removal of excisable goods. 4. Penalty imposition under Section 11AC. Issue-wise Detailed Analysis: 1. Entitlement to Duty Exemption under Notification No. 3/2001 C.E.: The primary issue revolves around whether the Assessee was rightfully granted the benefit of duty exemption under Notification No. 3/2001 C.E. The notification stipulates that no credit of duty paid on chassis or other inputs used in the manufacture of vehicles should be taken. The Assessee, however, availed Modvat Credit on inputs like glasses and paints, which contravenes the condition No. 41 of the notification. The Tribunal initially allowed the Assessee's appeal, but the High Court found that the Assessee's action of taking credit disqualified them from the exemption. 2. Reversal of Modvat Credit: The Assessee admitted to taking Modvat Credit on glasses used in manufacturing but did not reverse it at the time of removal of goods or thereafter. The Tribunal concluded that the credit was merely availed, not utilized, and had lapsed after the Assessee surrendered their license. However, the High Court disagreed, stating that the Assessee's failure to reverse the credit despite several opportunities meant that the benefit of the exemption notification was rightly denied. 3. Alleged Clandestine Removal of Excisable Goods: The Revenue alleged that the Assessee was involved in the clandestine removal of excisable goods without paying the requisite duty. The investigation revealed that the Assessee built bodies on the chassis of motor vehicles and claimed exemption under Notification No. 3/2001 C.E. without fulfilling the necessary conditions. The High Court upheld the Revenue's stance, emphasizing that the Assessee's actions amounted to a clear case of clandestine removal, as they did not pay the duty on the goods cleared. 4. Penalty Imposition under Section 11AC: The order-in-original imposed a penalty of Rs. 16,48,780/- on the Assessee for the wrongful availment of the exemption and clandestine removal of goods. The Tribunal had set aside this penalty, but the High Court reinstated the penalty, noting that the Assessee's actions satisfied the ingredients of Section 11AC, which pertains to penalties for evasion of duty. However, in the final judgment, the High Court decided to delete the penalty imposition without creating any precedent, maintaining the rest of the order-in-original. Conclusion: The High Court allowed the Revenue's appeal, answering the substantial question of law in favor of the Revenue and against the Assessee. The Assessee's failure to reverse the Modvat Credit and the clandestine removal of goods justified the denial of the exemption benefit. The penalty imposed was deleted as a specific relief in this case, but the overall order-in-original was upheld.
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