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TMI Blog2006 (1) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... oods were destroyed on 12th June, 2003 and 16th April, 2005 respectively. The medicines so destroyed were valued at Rs. 1,81,55,048/- on which the duty was worked out to be Rs. 29,04,807/- and that very amount was ordered to be remitted by the Commissioner, Central Excise, Ahmedabad-II. However, on such drugs/medicines, so destroyed the input credit availed in total was for an amount of Rs. 23,70,893/- which was availed and utilised by M/s. Intas Pharmaceuticals Ltd. while manufacturing such other medicines which ultimately became the bone of contentions in as much as the Commissioner vide his show cause notice issued under F. No. V.30/15-165/Dem/05 dated 14th October, 2005 called on M/s. Intas Pharmaceuticals Ltd. to show cause within 30 days as to why the amount of Cenvat credit to the tune of Rs. 23,70,893/- should not be demanded and be recovered from them along with interst under provisions of Rule 12 of the Cenvat Credit Rules, 2002 read with Rule 14 of Cenvat Credit Rules, 2004 and further read with Section 11A(1) of the Central Excise Act, 1944. The interest was further demanded under provisions of Section 11AB of Central Excise Act, 1944 and M/s. Intas Pharmaceuticals Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance placed by the Commissioner in M/s. Mafatlal Industries Ltd. case is not in favour of revenue rather is against the revenue; that in para-5 of M/s. Mafatlal Industries Ltd. case the Hon ble Tribunal had observed that the decision of the northern Bench of the Hon ble Tribunal in case of M/s. Inalsa Ltd. v. CCE, New Delhi that the remission of duty on the finished goods cannot be equated with exemption to goods and that the inputs can be considered to have been put to the intended use of manufacturing of the final products. Since in their case, the final product is not exempt from payment of duty, the credit of duty should not be denied; that this point had not been put before the Hon ble Tribunal in case of M/s. Mafatlal Industries Ltd. (ii) In terms of Sub-rule 2, it requires reversal of credit @ 10% of the sale price of the exempted goods when no separate accounts of inputs used in the manufacture of exempted goods have been maintained. In other words, they are referring to ratio of earlier rule what was known as popularly Rule 57CC. In other words, their, this limb of arguments is that when goods has been destroyed, it means value realised is nil so payment of sum of 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion permission, no condition has been incorporated in the letter granting the remission permission for the reversal of Cenvat credit. Therefore, the department cannot demand the Cenvat credit so utilised, which may correspond to the finished products which were destroyed after more than a period of such destruction; that the notice ought to have been issued within one year from the date of granting such permission; that no specific grounds has been mentioned in the show cause notice to extend the larger period. (vii) That the inputs have been got processed and had been put in use thus, had lost its original shape, size, color etc. and actually stands consumed during the process for purpose of manufacture of final products and therefore, basic purpose of allowing Cenvat credit is fully justified and satisfied. Therefore, the question of reversal of Cenvat credit does not arise at all; that both the applications for destruction were submitted after issuance of CBEC circular dated 7-8-2002 which mandates that credit availed cannot be denied. (viii) That in view of following decisions as held by Hon ble Tribunal in past, the Cenvat credit contained in the final product which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner, Banglore as reported in 2002 (141) E.L.T. 224 (Tri. Bang). And that view of such judgments, the loss of final goods due to act of God or failure of human conduct has to be treated as one and the same i.e. on same footing. (xii) That when the demand itself does not survive, question of interest and penalty is also ruled out. (xiii) In view of the foregoing submissions, arguments and case laws, it was concluded that the notice deserves to be dropped and no liability can be fastened on M/s. Intas. Discussions and Findings : 4. After going through the case records carefully and on perusal of submissions advanced by the noticee company, it can be seen that the proposed cause of action are being resisted on merits as well as on limitation. However, the notice itself proposes to sustain the proposed cause of action on grounds of limitation as well as on grounds of merit as mentioned on the body of show cause notice. 5. The first point of the argument is, that in the case of Inalsa Ltd v. CCE as reported in 1997 (90) E.L.T. 417 (Tri.) and in Kirloskar Electric Co. case as reported in 2002 (141) E.L.T. 224 it had been held that when the duty on final or finished product i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emission of duty, the input credit would be admissible. In fact, the CBEC Circular No. 650/41/2002-CX., dated 7-8-2002 duly clarified that once the inputs have been used, even if the duty is remitted on final products Cenvat credit/input credit cannot be denied. However, the Hon ble Tribunal in its order dated 12-3-2003 as reported in the case of Mafatlal Industries v. CCE, Ahmedabad as reported in 2003 (154) E.L.T. 543 held that once duty is not paid on final products for whatsoever reason, the corresponding input credit cannot be allowed and the manufacturer or tax payer cannot be allowed to be unjustly enriched. Taking the leaf out of the said decision, the CBEC issued another Circular No. 800/33/2004-CX, dated 1-10-2004 wherein earlier Circular dated 7-8-2002 was withdrawn and it was also clarified that the input credit on such final products on which duty has been remitted should not be allowed rather it should be recovered with interest. Unfortunately in both these CBEC Circulars, i.e. of 7-8-02 and 1-10-04, there is no deliberation or mention as what will happen if the inputs are lost as such by God s action or by theft, pilferage, etc. as well what will be the position if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in final products. 7. On merits of the present proceedings it could be stated that Mafatlal Industries judgement has very clearly pronounced the law which has been subsequently followed by some of the Benches as reported in case of Tambraparani Coatings v. CCE, Pondicherry as reported in 2006 (193) E.L.T. 80 (Tri-Chennai). The Hon ble Tribunal Mumbai Bench in case of Mafatlal Industries has held that : The appellants has already been compensated by the insurers for the value of the finished goods which is inclusive of the value of the inputs. The intention of the Modvat scheme is that the duty paid on inputs can be taken credit for paying duty on the finished goods to give relief against the cascading effect of excise duty. When the duty on the finished goods is being remitted, allowing credit of the duty paid on inputs would confer a totally unintended benefit. Allowing such credit when the finished goods suffer no duty would amount to allowing a cash refund as it can be utilised for paying duty on other goods. There is no provision in the Central Excise Rules to either allow refund of duty paid on inputs or to grant remission of such input duty when the finished goods made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Intas has claimed that they are well versed in Central Excise Law and Procedures; that they are keeping themselves abreast with the latest development of the Central Excise Law and Procedures; then as such it is not comprehensible as they were not aware of the Tribunal s decision in Mafatlal Industries case as reported in March, 2003 as well as about Golden Polymers case of Calcutta Bench, as referred earlier. The CBEC Circular, was not issued under the provisions of section 37B of the Central Excise Act therefore had to be considered on its face value. No doubt, as interpreted by highest courts of law, it could be binding on the departmental authorities. But there are contrary decisions too. One should not lose sight of such clarifications, which are not a piece of legislation, and such Circular does not encompass every taxpayer in similar case. Every circumstances cannot be covered, conceptualised or contemplated while sitting in judgment. In a matter of quasi judicial functions and when one addresses an issue in totality, one could be very much within the limits if he or she does not cross the outer parameter of rules/law or schemes of the Act in not conforming to the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances. Such orders are not reviewed and are not subjected to review and therefore, raising the issue that had attained such permission the finality and hence cannot be revoked or equating the same with the approval of price list and classification list and relying on judgment of the Supreme Court in the case of Flock India Ltd. is highly misplaced on the part of M/s. Intas. On fairness and equity and even" under clear rules which is also borne out from the case records, that the issue of reversal of Modvat credit or calling it back never arose in between remission and destruction of goods. M/s. Intas being aware of Tribunal s decision of Mafatlal Industries case, destroyed the goods in June, 2003 and April, 2004 suo moto, in a scheme of self-removal procedure did not reverse the Cenvat credit which they were duty bound to do so of their own. Keeping deliberately behind the back the legal position one should not expect protection of limitation as the intention stands manifested in so many ways. If the officers of the Central Govt. or authorities under the scheme of Cenvat rules and procedures fails to appreciate or mis-appreciate the provisions of law, then to my understanding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct as that may impinge on the independent functioning of quasi judicial authorities. Therefore, the error of judgment or mis-appreciation of correct legal position could be at any stage. Therefore, it could be corrected subsequently by all concerned authorities/bodies and by the Hon ble Tribunals/courts, etc. 10. Therefore, in all fairness, equity and good consciousness one should not be allowed to derive undue benefit, which is not flowing out of the provisions of law. The Cenvat credit was reversible to the tune of Rs. 23.70 lakhs on the day when the goods were not found fit for human consumption. When the batches of such medicines were rejected, obviously the Cenvat credit ought to have been reversed suo moto. Clearly on those days the provisions of CBEC circular dated 7-8-2002 was not in application. Therefore, presuming by M/s. Intas that such Circular and such case law will come in future in their favour is expecting too much from the assessee. Therefore, the protection of normal limitation is not available in the facts and circumstances of the case. After going through the catena of decisions and case laws as referred by the learned representatives Mr. S. S. Gupta and Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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