TMI Blog2014 (12) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... ch view of the matter, it has to be held that the view taken by the Allahabad High Court has not been accepted by the Supreme Court. - Tribunal in Ashok Iron and Steel Fabricators case, referred [2002 (1) TMI 91 - CEGAT, NEW DELHI] as well as the decision of the Bangalore Bench of the Tribunal in the assessee's own case have emphasised over and over again on para (17) of the decision of in Dai Ichi Karkaria Ltd. Case, referred [1999 (8) TMI 920 - SUPREME COURT OF INDIA], which has very clearly set out the position as to how the credit taken on inputs should be utilized. Once it is held that no co-relation between the raw material and the final product is required, the appellant's plea stands answered. If credit can be taken against excise duty on a final product manufactured on the very day, it makes it abundantly clear that there need not be co-relation between the input and the goods cleared and as a result, validly taken credit need not be reversed. The Central Excise Rules would come into play in the following manner, that is to say, on the date when the final goods become exempt from payment of duty, for the inputs received on and after the said date, no credit can be take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELT 353? iv. Whether the second respondent is right in deciding the appeal of the appellants by not following the decision of the Larger Bench in the case of CCE, Rajkot v. Ashok Iron and Steel Fabricators, 2002 (140) ELT 227 (Tri.LB)? v. Whether the second respondent is right in disagreeing, contrary to the law laid down by the Supreme Court in the case of UOI v. Paras Laminates (P) Ltd., 1990 (49) ELT 322, with the decision of the Co-ordinate Bench in appellants' own case vide Final Order No.1463/2005, dated 24.8.2005 which has held that the decision in the case of M/s. Albert David Ltd. v. CCE, 2003 (151) ELT 443 (Tr.Del.) is per incuriam? 2.1. The facts in a nutshell are as under: The appellant is a manufacturer of agricultural tractors. For manufacture of tractors, the appellant buys raw materials, parts/components (inputs) on payment of duty. The final product, namely, tractors, was exigible to excise duty. Therefore, the appellant took credit on the duties paid on the inputs under Rule 3 of the Cenvat Credit Rules. 2.2. On and from 9.7.2004, tractors falling under Tariff item 8701 were exempted from excise duty vide Sl.No.295 of Notification No.23/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said order, the appellant filed appeal before the Tribunal reiterating the plea that the appellant is not liable to reverse or payback the credit of duties attributable to the inputs lying in stock as such and inputs forming part of finished tractors lying in stock as on 9.7.2004, as the appellant availed cenvat credit validly when there was no exemption from excise duty on tractors. It was also pleaded that there was no fraud, misstatement or irregularity in claiming cenvat credit. The appellant relied upon the decision of the Supreme Court in Dai Ichi Karkaria Ltd. case and the decision of the Larger Bench of the Tribunal in Ashok Iron and Steel Fabricators case, referred supra. That apart, the appellant pointed out that in the appellant's own case, an identical issue was answered by a Co-ordinate Bench of the Bangalore Tribunal in Final Order No.2103/2006, dated 23.11.2006 in favour of the appellant by placing reliance on the decisions in Dai Ichi Karkaria Ltd. case and Ashok Iron and Steel Fabricators case, referred supra. 2.7.1. The Tribunal, in the present case, was not inclined to accept the assessee's plea, and placed heavy reliance on the decision of the Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to hold that the Bangalore Bench decision in the appellant's own case is not acceptable and accordingly, upheld the order passed by the Commissioner of Central Excise in respect of demand of duty and a portion of the interest, but set aside the penalty imposed. 2.8. Challenging the said order passed by the Tribunal, the present appeal is filed on the substantial questions of law, referred supra. 3. It was pointed out by Mr.Parthasarathy, learned counsel appearing for the appellant that the Larger Bench decision of the Tribunal in Ashok Iron and Steel Fabricators case, referred supra, decided an issue which is identical to the facts of the present case. The Tribunal in Ashok Iron and Steel Fabricators case, referred supra, following the decision of the Supreme Court in Dai Ichi Karkaria Ltd. case, referred supra, distinguished the decision of the Larger Bench of the Tribunal in Khanbhai Esoofbhai v. Collector 1999 (107) ELT 557 (Tri.LB) and held that it is not necessary to place the matter before a Bench of seven members. 4. To sum up the facts, one another factor which becomes relevant is that the decision rendered by the Bangalore Bench of the Tribunal in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the modvat rules which provides for a reversal of the credit by the Excise authorities where it has been illegally and irregularly taken, in which event it stands cancelled or if utilised, has to be paid for. 8. The Punjab and Haryana High Court in the case of Commission of Central Ecise, Panchkula v. HMT Ltd., Ponjore, reported in 2010-TIOL-316-HC-P H-CX at paragraph 17 have held as under: 'Similarly, the Principal/Larger bench of the Tribunal after considering the various judgments mentioned in case H.M.T. v. Commissioner of Central Excise's case (supra) (between the parties) has held that when the input-credit legally taken and utilised on the dutiable final products, need not be reversed on the final product becoming exempt subsequently. The observations of the aforesaid judgment 'mutatis mutandis' are applicable to the present controversy.' 9. Therefore it is clear from the aforesaid judgment of the Apex Court that once the input credit is legally taken and utilized on the dutiable final product, it need not be reversed on the final product being exempted subsequently. Only if any products are purchased subsequent to the said exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Cenvat Credit Rules, 2004 reads as under: Rule 11. Transitional provision.- (1) *** (2) *** (3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if,- (i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under section 5A of the Act; or (ii) the said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported. (emphasis supplied) Prior to 1.3.2007, the position is that cenvat credit validly ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bond Lipton India Ltd. v. CER, 2012 (283) ELT 336 (All.). In that case, the assessee was engaged in the manufacture of packet tea and credit on the inputs was taken on the inputs for use in manufacture of final product till 27.2.1993. However, as tea was exempted from payment of central excise duty with effect from 28.2.1993 under Notification No.2/93, dated 28.2.1993, the department contended that the credit should be reversed though it was availed prior to exemption granted. The Allahabad High Court distinguished the decision in Dai Ichi Karkaria case, referred supra, holding that in the case of Dai Ichi Karkaria, the question of reversal of Modvat credit on raw material after the final products become wholly exempted from excise duty was not considered. It also took the view that allowing Modvat credit on inputs which are brought into the factory, for which the credit has been taken before the date when the final product became exempted lying unutilized as raw material, will amount to unjust enrichment. This primarily appears to be the reason on which the Allahabad High Court held against the assessee and in favour of the department. 10. We have considered the rival submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and factually. If there had been no MODVAT Scheme excise duty on the raw material would be included in the cost of production of the excisable product. The MODVAT Scheme did not alter this fundamental position. By virtue of it the cost of the raw material was not reduced. The MODVAT Scheme resulted in reducing the excise duty on the excisable product. It was a separate and special facility that had the effect of reducing the excise duty incidence on the excisable product and had no bearing in determining the cost of its production. The credit of excise duty on the raw material in the register maintained for MODVAT purposes was only a book entry which might be utilised later for payment of excise duty on the excisable product. In other words, it matured when the excisable product was removed from the factory and the stage for payment of excise duty thereon was reached. Actually, credit was taken, that is, availed of or utilised, at the time of the removal of the excisable product. Consequently, the cost of production of the excisable product was not reduced by the amount of the MODVAT credit on the raw material. The credit was a contingent credit. It might be disallowed under cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zette: Refund amount = (Export turnover of goods+ Export turnover of services) WNet CENVAT credit Total turnover Where,-- (A) Refund amount means the maximum refund that is admissible; (B) Net CENVAT credit means total CENVAT credit availed on inputs and input services by the manufacturer or the output service provider reduced by the amount reversed in terms of sub-rule (5C) of rule 3, during the relevant period; (C) Export turnover of goods means the value of final products and intermediate products cleared during the relevant period and exported without payment of Central Excise duty under bond or letter of undertaking; (D) Export turnover of services means the value of the export service calculated in the following manner, namely:-- Export turnover of services = payments received during the relevant period for export services + export services whose provision has been completed for which payment had been received in advance in any period prior to the relevant period - advances received for export services for which the provision of service has not been completed during the relevant period; (E) Total turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fabricators case, referred supra as well as the decision of the Bangalore Bench of the Tribunal in the assessee's own case have emphasised over and over again on para (17) of the decision of in Dai Ichi Karkaria Ltd. Case, referred supra, which has very clearly set out the position as to how the credit taken on inputs should be utilized. To sum up, paragragh (17) of the Dai Ichi Karkaria Ltd. case, referred supra, which answers the present issue, is extracted hereunder: 17. It is clear from these rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the rules which provides for a reversal of the credit by the Excise Authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its ben ..... X X X X Extracts X X X X X X X X Extracts X X X X
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