TMI Blog2015 (11) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty, would not come within the scope of expression "exempted final product" used in Rule 57-R (1) equivalent to Rule 6 (4) of the Cenvat Credit Rules, 2004. The Tribunal has rightly held that availment of Modvat Credit on capital goods to be job work is in order. For the reasons aforesaid, the substantial question of law is answered in favour of the assessee and against the Revenue. - Decided in favour of Assessee. - C.M.A. NO. 579 OF 2008 - - - Dated:- 19-6-2015 - MR. R.SUDHAKAR AND MS. K.B.K.VASUKI For The Appellant : Mr. E.Vijay Anand For The Respondents : Mr. Thriyambak S.Kannan for M/s.Karthik Sundaram JUDGMENT (DELIVERED BY R.SUDHAKAR, J.) Aggrieved by the order of the Tribunal in allowing the appeal filed by the Revenue, the appellant/assessee is before this Court by filing the present appeal. Vide order dated 22.02.08, this Court, while admitting the appeal, framed the following substantial questions of law for consideration :- Whether the CESTAT is correct in law to hold that finished goods cleared without payment of duty under job work procedure to the principal manufacturer would not come within the scope of expression 'exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in Kirloskar Oil Engines Ltd. - Vs - CCE, Pune (1994 (73) ELT 835) on the ground that Section 57-C and 57-T of the Central Excise Rules, 2002, provides that no credit of duty paid on inputs used in the manufacture of final products should be given if the final product is exempted from payment or duty or chargeable to 'Nil' rate of duty. 5. The further appeal by the assessee to the Tribunal came to be allowed placing reliance primarily on the decision of the Larger Bench of the Tribunal in Sterlite Industries (I) Ltd. (2005 183 ELT 353 (Tri. - LB) , which was followed by other Tribunals in Bharat Fritz Werner Ltd. - Vs - CCE, Bangalore (2005 (191) ELT 1099) (Tri. - Bang.) and ( CCE, Chennai - Vs - Ucal Machine Tools Ltd. (2006 (74) RLT 511 (CESTAT - Che.) . The Tribunal, on consideration of the appeal, held as under :- 4. As rightly pointed out by ld. counsel, the appellant's challenge to the demand of ₹ 18,91,930/= is squarely supported by the Tribunal's Larger Bench decision in Sterlite Industries (supra). The Larger Bench decision was followed in the other cases cited by counsel. We note that in the case of Ucal Machine Tools (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturer for the manufacture of exempted goods. It is further submitted that the rule as was existing then, viz., Rule 57R (1) and also Rule 6 (4) of the Cenvat Credit Rules, 2002, have not been considered by the Tribunal in its proper perspective, as the said rules categorically debars the person from claiming credit by the manufacturer/assessee in respect of capital goods. The Tribunal has also failed to consider the ratio laid down in Kirloskar's case (supra) , wherein it is clearly held that Rule 57C of the erstwhile Central Excise Rules, 1944, mandates that no credit of duty paid on inputs used in the manufacture of final products shall be given if the final product is exempted from payment of duty or is chargeable to 'Nil' rate of duty. It is further submitted that the Tribunal failed to note that though Unit-I and Unit-II belong to the respondent/assessee, they are treated as two separate entities for the purpose of Central Excise Law and the facility of exemption has to be seen with reference to the activity carried on by each unit. For the reasons aforesaid, it is submitted that the order of the Tribunal is liable to be interfered with. 7. Per contra, lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-X procedure and utilised in the manufacture of tractor, which were cleared on payment of duty holding that no duty was paid on the parts at the time of clearance. It held that Rule 57- C will apply and no Modvat credit would be admissible. Such a view, on appeal, was reversed by the Supreme Court in Escorts Ltd. - Vs - Commissioner of Central Excise, Delhi, (2004 (171) ELT 145 (SC) , wherein the Supreme Court held as hereunder :- 8. It is to be seen that the whole purpose of the Notification and the Rules is to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. rule 57D (2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product. 9. In cases of manufacturers like the appellants the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the trac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in agreement with the appellant's contention that Rule 57C debars taking of credit in respect of the inputs used in the manufacture of the final product, if final product is exempted from the whole of duty of excise leviable thereon or chargeable to nil rate of duty. As such, to attract the provisions of Rule 57C, two situations in respect of the final product should be satisfied. Either the final product should be exempted which situation can arise only when there is an exemption notification issued under Section 5A of the Central Excise Act or the final product is chargeable to nil rate of duty. Expression chargeable to nil rate of duty or exempted from whole of duty was considered by the Tribunal in the case of Orissa Synthetics Ltd. - Vs - Collector of Central Excise (1995 (77) ELT 350 (Tri.)) and after taking note of the Ministries clarifications issued vide Circular No.10/75/CX.6 , it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said lett ..... X X X X Extracts X X X X X X X X Extracts X X X X
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