2018 (6) TMI 232 - AT - Central Excise

Benefit of N/N. 03/2006-CE dated 01.03.2006 (Sr.No. 28) - instant foods mixes - Gota Mix, Khaman Mix, Dalwada Mix, Dhosa Mix, Gulab Jamun Instant Mix etc. - Reversal of CENVAT credit - packing materials - inputs contained in the final products lying in stock or in process - Held that - The issue is no longer res integra and has been settled by this Tribunal in the case of COMMISSIONER OF C. EX., AHMEDABAD VERSUS RM FOODS 2009 (8) TMI 463 - CESTAT, AHMEDABAD , where it was held that Admittedly, the notification exempts instant food mixes. The products manufactured by the respondent are nothing but instant food mixes. After exempting instant food mixes, the notification goes to further elaborate the same by giving exemptions to such mixes when it used expression such as - the appellants are eligible to the benefit of N/N. 03/2006-CE dated 01.03.2006. Reversal of CENVAT credit lying in balance in respect of packing materials - Held that - The final products manufactured by the appellants were exempted vide N/N. 03/2007-CE dated 01.03.2007. The sub-rule (3) inserted in Rule 11 of CCR, 2004 by virtue of N/N. 10/2007-CE (N.T.) dated 01.03.2007 - On a plain reading of the said sub-rule, it is found that the appellant are required to reverse an amount of ₹ 1,64,185/- equivalent to CENVAT credit taken on packing materials, used in packing of semi-finished goods and material used in packing of finished products on, availing the exemption N/N. 03/2007-CE dated 01.03.2007 when the amendment in Rule 11 (3) came into effect from 01.03.2007. Penalty - Held that - Since the SCN was issued for the normal period of limitation i.e. on 03.04.2007 and the issue relates to interpretation of law besides the appellant reversed the credit on 16.03.2007, that is, before issuance of SCN, therefore, imposition of penalty on the appellant is unwarranted and accordingly set-aside. Appeal allowed in part.

Summary

Issues:
1. Eligibility of instant food mixes for exemption under Notification No. 03/2006-CE.
2. Reversal of Cenvat credit on packing materials under Rule 11 (3) of CCR, 2004.

Issue 1: Eligibility of instant food mixes for exemption under Notification No. 03/2006-CE:
The case involved the appellant, a manufacturer of various instant food mixes, availing Notification No. 03/2006-CE dated 01.03.2006 at 8% duty rate. The dispute arose when the department claimed the benefit was not applicable to all instant food mixes manufactured by the appellant. The appellant also availed Cenvat credit on packing material. The issue was whether the instant food mixes like Gota Mix, Khaman Mix, Dalwada Mix, etc., not specifically mentioned in the notification, were eligible for the exemption. The appellant argued citing a precedent Commissioner of Central Excise, Ahmedabad vs. R. M. Foods, where it was held that the term "such as" in the notification was illustrative, not exhaustive. The Tribunal upheld the appellant's eligibility for the benefit of the notification, following the precedent, and dismissed the Revenue's appeal on this issue.

Issue 2: Reversal of Cenvat credit on packing materials under Rule 11 (3) of CCR, 2004:
Regarding the reversal of Cenvat credit on packing materials under Rule 11 (3) of CCR, 2004, the Tribunal found that the appellant was required to reverse an amount of &8377; 1,64,185/-, equivalent to the Cenvat credit taken on packing materials, upon availing the exemption under Notification No. 03/2007-CE dated 01.03.2007. The Rule 11 (3) came into effect from 01.03.2007, necessitating the reversal of credit. However, the Tribunal set aside the penalty imposed on the appellant as the reversal was done before the show cause notice was issued, and the issue involved interpretation of the law. Therefore, the penalty imposition was deemed unwarranted, leading to the dismissal of the Revenue's appeal and partial allowance of the appellant's appeal by setting aside the penalty.

This detailed analysis of the judgment addresses the issues involved comprehensively, highlighting the legal arguments, precedents, and the Tribunal's findings on each issue.