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2024 (12) TMI 1133 - AT - Central ExciseAvailment of MODVAT/CENVAT Credit - Suppression of manufacturing details - separate financial records were not maintained in respect of exempted products and dutiable products - violation of various provisions contained in Rule, 57 of the then Central Excise Rules, 1944 read with Rule, 12 of the CENVAT Credit Rules, 2001 and proviso of Section 11A of the Central Excise Act - HELD THAT - Modified Value Added Tax (MODVAT) was introduced in 1986 in India that has taxed the value addition to a product and not to the product itself. A manufacturer pays duties on the inputs procured by it and capital goods purchased by it for the purpose of manufacturing final product(s) on which he pays the duty and the duty paid by him on its inputs and capital goods are credited to its account so as to enable him to adjust the said amount at the time of payment of duty on the final product, so that the ultimate consumer will not suffer the burden of duty liability again again on the product purchased by him/her and also on all its components, those were used to manufacture the final product. Appellant had already paid more than ₹11 lakhs for the relevant period in addition to what was taken in total towards accumulated CENVAT Credit, which of course is not due to it legally, as per provision of law but judicial decision is consistent on this issue starting from what is being relied on by this Tribunal in its final order dated 21.11.2005 namely the case of Narayan Polyplast (Respondent) 2004 (11) TMI 112 - SUPREME COURT , Punjab Tractors Ltd. 2005 (2) TMI 141 - SUPREME COURT and Narmada Chematur Pharmaceuticals Ltd. 2004 (12) TMI 93 - SUPREME COURT and the one passed in CENVAT regime namely Commissioner of Central Excise Vs. Ajinkya Enterprises 2012 (7) TMI 141 - BOMBAY HIGH COURT , as relied upon by learned Counsel for the Appellant, wherein it had been consistently held that once duty on final product has been accepted by the Department, CENVAT Credit availed need not be reversed even if the activity does not amount to manufacture. In the order passed by Hon'ble Bombay High Court reservation was expressed on the ground that Revenue neutral situation were discussed in Narmada Chematur Pharmaceuticals Ltd. case but this judgment is cryptic in which discussion on the same was missing. Concurring with the findings of the Commissioner that not a single final product was dutiable, invocation of extended period would result in the same situation as that of a duty assessment for normal period but having regard to the fact that there is a clear observation of Hon'ble Bombay High Court that specific finding concerning allegation of suppression of material fact was available in the order passed by the Commissioner, that has not been dealt with properly by the Tribunal, it is considered worthwhile to reiterate that at no point of time for the entire extended period covering calendar month from March 1997 to August 2001, final products manufactured by Appellant were dutiable and after analysing with reference to judicial precedent on the legality of availment of inadmissible credit that was adjusted against payment of tax on non dutiable products, nothing survived to confirm any liability of dues of any kind on the Appellant, who though had not mentioned while registering under Excise Act about its plan to manufacture vegetable edible oil that was subjected to nil rate of duty had filed periodical intimation under Rule, 173B of the Central Excise Rules, 1944 since 24.11.1997 after started manufacturing after March 1997, in which event for irregularity in applying for registration Appellant could have been prosecuted but that would never justify invocation of extended period. The order passed by the Commissioner of Central Excise, Pune-III is hereby set aside - Appeal allowed.
Issues Involved:
1. Suppression of manufacturing details and availing of MODVAT/CENVAT Credit. 2. Revenue neutrality and its implications. 3. Legality of availing MODVAT/CENVAT Credit on exempted products. 4. Invocation of extended period for duty assessment. 5. Interest liability on wrongly availed MODVAT/CENVAT Credit. Issue-wise Detailed Analysis: 1. Suppression of Manufacturing Details and Availing of MODVAT/CENVAT Credit: The primary issue in this case was the appellant's failure to disclose the manufacturing of refined edible oil, which attracted a "Nil" rate of duty, while availing CENVAT Credit on inputs and capital goods. The appellant only registered for by-products, which were dutiable, and paid excise duty on these by-products. The respondent contended that the appellant suppressed manufacturing details and availed CENVAT Credit erroneously, as all products, including by-products, were exempt from duty. The Tribunal noted that the appellant corrected its registration upon advice and declared edible vegetable oil as the main product, aligning with the Union Budget 1997-1998 requirements. 2. Revenue Neutrality and Its Implications: The appellant argued that the entire exercise was revenue neutral, as the total duty paid exceeded the credit availed. The Tribunal referenced several Supreme Court decisions, including Narayan Polyplast and Narmada Chematur Pharmaceuticals Ltd., which held that if duty on exempted goods is paid, the benefit of MODVAT Credit cannot be denied due to revenue neutrality. The Tribunal emphasized that the appellant paid more than Rs. 11 lakhs in addition to the CENVAT Credit availed, indicating a revenue-neutral situation. 3. Legality of Availing MODVAT/CENVAT Credit on Exempted Products: The Tribunal examined whether the appellant was entitled to MODVAT/CENVAT Credit when all end products were exempt from duty. The Commissioner initially concluded that the appellant was not entitled to credit, as separate records for exempted and dutiable products were not maintained. However, the Tribunal clarified that separate records are only required when at least one product is dutiable. Since all products were exempt, the appellant was not obligated to maintain separate records, and the credit availed was deemed permissible under the principle of revenue neutrality. 4. Invocation of Extended Period for Duty Assessment: The Commissioner invoked an extended period for duty assessment, citing suppression of material facts by the appellant. However, the Tribunal found that the appellant had filed periodic intimations under Rule 173B of the Central Excise Rules, 1944, since November 1997, after starting manufacturing in March 1997. The Tribunal concluded that the extended period was unjustified, as the appellant's actions did not warrant such invocation, and any irregularity in registration could have been addressed through prosecution rather than extended duty assessment. 5. Interest Liability on Wrongly Availed MODVAT/CENVAT Credit: The Tribunal addressed the issue of interest liability on wrongly availed MODVAT/CENVAT Credit. It noted that interest is payable from the date credit is wrongly taken or utilized. However, subsequent legislative amendments clarified that interest is only applicable when the credit is utilized, not merely noted in the ledger. The Tribunal determined that since the appellant paid differential duty on the final product, no interest liability accrued to the Revenue, maintaining the revenue-neutral position. Conclusion: The Tribunal allowed the appeals, setting aside the Commissioner's order and granting consequential relief to the appellant. It emphasized that the appellant's actions resulted in a revenue-neutral situation, negating any liability for duty, interest, or penalties.
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