Customs, Excise and Gold Tribunal - Bangalore
The Commissioner Of Central Excise vs Venugopal Fruit Processed Industries ... on 7 December, 2005
Equivalent citations: 2006(106)ECC507, 2006ECR507(TRI.-BANGALORE), 2006(201)ELT299(TRI-BANG)
JUDGMENT T.K. Jayaraman, Member (T)
1. The Revenue has filed all these appeals against Orders-in-Appeal Nos. mentioned above, passed by the Commissioner of Central Excise (Appeals), Guntur. Since the issue involved in all these appeals is one and the same, we are taking up all these appeals for disposal as per law.
2. The respondents are manufacturers of fruit pulp/concentrate, an excisable commodity. W.e.f.. 25.07.1991, the goods were exempted. The respondents were availing Cenvat credit in respect of the inputs/packing material. Revenue proceeded against the respondents for reversal of the Cenvat credit utilized irregularly as the final products were exempted from payment of duty w.e.f. 25.07.1991. The respondents relied on the following decisions:
(i) CCE, Bangalore v. Wipro Information Technology - 1998 (33) ELT 172(Tri.)
(ii) CCE v. Sri Sarvaraya Sugar Bottling Limited - 1992 (59) ELT 427 (Tri.)
(iii) CCE, Rajkot v. Ashok Iron and Steel Fabricators -
3. The original authority accepted the contentions of the respondents and dropped the proceedings. However, Revenue appealed to the First Appellate Authority. The Commissioner (Appeals), relying on the decision in the case of CCE, Rajkot v. Ashok Iron & Steel Fabricators - , upheld the orders of the lower authority and rejected the Revenue appeals. It was stated that the above decision of the Tribunal was confirmed by the Apex Court as reported in 2003 (156) ELT A 212. As the issue stood settled in the respondents' favour, the lower authority decided in favour of the respondents.
4. However, Revenue is aggrieved over the Orders-in-Appeals on the following grounds:
(i) Allowing credit on the packing material used in the manufacture of fruit pulp lying in stock as well as contained in the goods on the date of exemption i.e. 25.07.1991 goes against the basic tenets of Modvat rules as they stood at that relevant point.
(ii) The whole Modvat scheme is in respect of excisable goods and if the product is exempted from a particular date, the Modvat credit taken in respect of inputs in stock and inputs contained in the final products needs to be reversed.
(iii) The Commissioner (Appeals) relied on the Tribunal decision in Ashok Iron & Steel Fabricators case. (supra).
(iv) The above case law is distinguishable.
(v) It deals with a situation where the final product was exempted and the intermediate products are dutiable for some time and have become exempted later by virtue of a notification. The demand pertains to the inputs lying as on the date of the exemption and to be specific, the credit involved on such inputs which was already utilized. It is to be noted that the Apex Court affirmed the decision in the case of Albert David Ltd. v. CCE, Meerut as wherein the demand for reversal of credit on inputs lying in stock was upheld. Two contra opinions have been arrived by the Apex Court on similar issues. Hence the issue of allowing the credit on inputs for the manufacture of exempted product has not reached any finality and needs to be appealed against.
(vi) Apart from credit involved in the inputs lying in stock, the credit involved in the inputs contained in the finished products also should be reversed in the light of the following decisions.
5. When the matter came up for hearing, Shri K. Sambi Reddy, the learned JDR appeared for Revenue and none appeared for the respondents.
6. We have gone through the records of the case carefully. In Revenue's appeal, it has been mentioned that the issue has not yet been settled in view of two contra decisions, both affirmed by the Supreme Court. The Larger Bench of the Tribunal (5 Members), in the case of CCE, Rajkot v. Ashok Iron & Steel Fabricators (cited supra), relied on the Apex Court's dictum laid down in Collector v. Dai Ichi Karkaria Ltd. - and held that the credit which was availed and utilised during the period when the final products became dutiable need not be reversed when subsequently final products are exempted from duty, as the credit was taken validly and its benefit was available to manufacturer without any limitation in time. It has further been mentioned that a different view has not been taken by the Supreme Court in any later decision. While coming to the above conclusion, the Tribunal extracted the following observations of the Apex Court.
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 acknowledgement 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 benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available.
7. In the present cases, we find that the original authority has already ordered reversal of credit on the packing materials (tins) lying unutilized as on the date of the exemption notification. This has not been contested by the respondents. As far as the credit taken and utilised is concerned, the ratio of CCE v. Ashok Iron's case (cited supra) is squarely applicable. As regards the case of Albert David cited by the Revenue, we find that the same has been decided by a Two-Members Bench of the Tribunal. We are of the opinion that the decision of a Five-Members Bench of the Tribunal affirmed by the Apex Court prevails over that of a Two-Members Bench's decision though affirmed by the Apex Court. Hence, we hold that the credit already taken and utilised need not be reversed. The Commissioner (Appeals) has rightly followed the Larger bench's decision. Hence, the Orders-in-Appeals are upheld and the Revenue's appeals are dismissed.