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2018 (5) TMI 468 - AT - Central ExciseDemand of duty - captive manufactured goods (moulds) cleared to their job workers without payment of duty - extended period of limitation - revenue neutrality - Whether in the facts and circumstance of the case and evidences placed on record, Member (Judicial) is correct in holding there being Revenue neutral situation, in terms of Rule 4(5) (a)/(b) of Cenvat Credit Rules, 2004, the appellant is not required to reverse Cenvat credit? - difference of opinion - majority order. Held that - the provisions of clause (b) of sub-rule 5 of Rule 4 of Cenvat Credit 2001 provide that if moulds are brought into the factory by a manufacturer, he is eligible for availment of Cenvat Credit of duty paid on the same. Further, the manufacturer of the goods is required to pay Central Excise duty on the goods manufactured. Incidentally, in the present case, the manufacturers of moulds and the legal entity eligible to avail Cenvat Credit of duty so paid is one and the same, on following all the provisions of law, the situation emerges that the appellant is required to debit their Cenvat Account for payment of Central Excise duty on the moulds manufactured by them and removed to the job-worker under said provisions of Rule 4 (5) (b) and further they are eligible to take Cenvat Credit of the same duty paid. The situation is Revenue neutral. In view of the majority decision, the appeal is allowed.
Issues Involved:
1. Applicability of Notification No.67/95-CE for captive consumption. 2. Revenue neutrality and its implications on duty payment. 3. Applicability of Rule 4(5)(a) and Rule 4(5)(b) of the Cenvat Credit Rules, 2004. 4. Invocation of the extended period of limitation. 5. Imposition of penalties and redemption fines. Detailed Analysis: 1. Applicability of Notification No.67/95-CE for Captive Consumption: The appellant, engaged in manufacturing automobile parts and dies, sent these dies to job workers without paying duty, claiming exemption under Notification No.67/95-CE dated 16.3.1995, which provides benefits for goods captively consumed within the factory. The Tribunal found that the dies were not used within the appellant's factory but were sent to job workers, thus not fulfilling the condition for captive consumption. Consequently, the benefit of Notification No.67/95-CE was deemed unavailable to the appellant. 2. Revenue Neutrality and Its Implications on Duty Payment: The appellant argued that the situation was revenue neutral, as any duty paid on the dies would be immediately available as Cenvat credit. The Tribunal referenced several cases, including Hartech Plastics Limited, SMT Machine (India) Ltd., and Ultratech Cements Ltd., to support the principle of revenue neutrality, concluding that the appellant was entitled to take Cenvat credit for any duty paid on the dies. Therefore, the demand for duty was not sustainable, and the seizure and redemption fines were set aside. 3. Applicability of Rule 4(5)(a) and Rule 4(5)(b) of the Cenvat Credit Rules, 2004: The appellant contended that under Rule 4(5)(b), they could clear goods to job workers without reversing the credit. The Tribunal found that Rule 4(5)(b) applies when Cenvat credit is taken on inputs or capital goods, which was not the case here as the dies were final products. However, the majority opinion held that the situation was revenue neutral, and thus, the provisions of Rule 4(5)(b) were applicable, supporting the appellant's position. 4. Invocation of the Extended Period of Limitation: The Tribunal examined whether the extended period under Section 11A(1) of the Central Excise Act, 1944, was justifiably invoked. The Member (Technical) argued that the appellant deliberately availed the notification benefit without eligibility, constituting wilful suppression. The appellant's removal of dies to job workers without informing the Revenue justified the extended period's invocation. However, the majority opinion did not find sufficient grounds for wilful suppression due to the revenue-neutral situation. 5. Imposition of Penalties and Redemption Fines: The initial order imposed penalties and redemption fines on the appellant. Given the revenue-neutral situation and the applicability of Rule 4(5)(b), the Tribunal set aside these penalties and fines. The majority opinion emphasized that since the appellant was entitled to Cenvat credit, the imposition of penalties was not justified. Separate Judgments: The Member (Judicial) found in favor of the appellant, emphasizing revenue neutrality and the applicability of Rule 4(5)(b). Conversely, the Member (Technical) upheld the demand, arguing against revenue neutrality and stressing the non-fulfillment of Notification No.67/95-CE conditions. The third Member (Technical) agreed with the Member (Judicial), leading to a majority decision in favor of the appellant. Majority Order: The appeal was allowed, and the impugned order was set aside, providing consequential relief to the appellant.
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