9911796707
TMI Blog2007 (8) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, they had balance of finished goods in packed as well as in loose condition. They also had certain packing materials. After becoming EOU, it is stated that the appellants did not cancel the Central Excise registration. They kept the Central Excise registration of the DTA Unit alive and cleared the goods, which were in stock at the time of conversion to EOU. During the period 9-4-1999 to 31-10-1999, while clearing the goods on payment of duty, they availed the Modvat credit available in their books and utilized the same for payment of duty on the goods cleared. After six months, Revenue issued two Show Cause Notices (i) dated 1-11-1999 demanding duty of Rs. 31,04,706/- on finished goods i.e. instant coffee cleared into DTA during the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under proviso to Section 3(1) of the Central Excise Act, 1944. (ii) The contention of the Commissioner (Appeals) that the action of appellants in discharging duty from the Modvat credit balances available, which were accrued during the regime of DTA unit is legal and there is no requirement of payment of duty under proviso to Section 3(1) of the Central Excise Act, 1944 is not sustainable. In terms of Board's Circular No. 77/99-Cus. dated 18-11-1999 "if the Modvat credit so availed of is lying in balance as unutilized on the date of conversion into EOU, it would lapse on conversion of DTA unit into EOU unit and cannot be utilized after such conversion". Though the Circular speaks about credit on capital Goods, the said analog applies mut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable to the present case i.e. 100% EOUs. (iv) The Commissioner (Appeals) held that the activity carried by the appellants in their 100% EOU is only packing and not repacking from bulk to retail packing. It is not the case that the retail packing emerges directly during the course of manufacture. The Totes/bulk cartons are in packed condition and converting it into retail packing is rightly called repacking. Presume that Commissioner (A)'s contention that it is only packing and not repacking, then the activity carried out by the assessee will fall under "adoption of any other treatment to render the product marketable" of Chapter Note 7 to Chapter 21. (v) The Commissioner (Appeals) held that as per Para 9.4 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cleared in Domestic Market without permission from Development Commissioner, on payment of applicable duties after obtaining necessary clearance from the Central Excise authorities. This letter is dated 7-5-1999. It is also seen from the records that only with the knowledge and permission of the Revenue, the respondents had cleared the goods and the packing materials into the Domestic Area on payment of appropriate duty. However, the duty was discharged by payment from the Modvat account. Now the contention of the Revenue is that the Modvat cannot be utilised because once a unit becomes EOU and ceases to function as a Domestic unit, then the Modvat that was at the balance at the time of conversion to EOU lapses. They have cited a Circular o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Z/EHTP/STP unit, it shall have two distinct identities with separate accounts. It is, however, not necessary for it to be a separate legal entity, but it should be possible to distinguish the imports and exports or supplies effected by the EOU/EPZ/EHTP/STP units from those made by the other units of the enterprise." The Commissioner (Appeals) has dealt with this provision and given a finding that the respondents have not committed any illegality in following the procedures. The entire activity of the respondents was within the knowledge of the department. There is actually no evasion of any duty. All the goods were manufactured when the unit was functioning only as a domestic unit. The point is that the Modvat credit accumulated had been u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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