Custom, Excise & Service Tax Tribunal
M/S Auro Weaving Mills vs C.C.E., Chandigarh on 12 March, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-III Date of hearing/decision: 12.3.2010 Central Excise Appeal No.1004 of 2008-SM Arising out of the order in appeal No.112/CE/Chd/08 dated 5.2.2008 passed by the Commissioner(Appeals), Central Excise, Chandigarh. For Approval and Signature: Honble Mr. M. Veeraiyan, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s Auro Weaving Mills Appellant Vs. C.C.E., Chandigarh Respondent
Appearance:
Shri Rupender Singh, Advocate for the appellant Shri I. Baig, Authorized Departmental Representative (SDR) for the Revenue Coram: Honble Shri M. Veeraiyan, Member (Technical) Oral Order No.____________________ Per M. Veeraiyan:
This is an appeal against the order of Commissioner (Appeals) No. 112/CE/Chd/08 dated 5.2.2008.
2. Heard both sides.
3.1 The relevant facts, in brief, are that the appellant procured inputs from M/s V.S.G.M., a 100% EOU. The dispute relates to the extent of credit available to the appellant in respect of the inputs received from 100% EOU.
3.2 As a 100% EOU , the supplying unit was liable to pay duty in terms of the proviso to Section 3 of the Central Excise Act being an a amount equal to the aggregate duties of customs which would be leviable under the Customs Act, 1962 or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India. The supplying unit paid concessional rate of duty in terms of Notification No.2/95 which exempted from so much of duty of excise as is in excess of the amount calculated at the rate of 50% of each of the duties of Customs which would be leviable under Section 12 of the Customs Act, 1962 (52 of 1962) read with any other notification for the time being in force issued under sub-section (1) of Section 25 of the Customs Act on the like goods produced or manufactured outside India, if imported into India. The appellant took credit of the entire amount of CVD payable and not 50% of the amount actually paid. The original authority restricted the credit available to the CVD component actually paid which was 50% of what has been taken by the appellant and ordered recovery of duty of Rs.4,34,956/- and imposed equal amount of penalty. He also demanded interest under Section 11AB of the Act. Commissioner (Appeals) has upheld the order of the original authority.
4. Learned Advocate for the appellant submits that when the inputs are procured from 100% EOU the issue of the extent of credit available has been settled by the Larger Bench of the Tribunal in the case of Vikram Ispat vs. C.C.E., Mumbai II 2000 (120) ELT 800 (Tri-LB). The credit taken by them is strictly in accordance with the method prescribed in the said decision. The Larger Bench decision in the case of Vikram Ispat has been explained and followed in several decisions of the Tribunal and he relies on one of them in the case of Parle Soft Drinks (P) Ltd. vs. C.C.E., Chennai 2004 (177) ELT 584 (Tri-Chennai).
5. Learned SDR reiterates the finding and reasoning of the Commissioner (Appeals).
6. I have carefully considered the submissions from both sides. The original authority held that the admissibility of Modvat Credit received by the recipient manufacturing unit from 100% EOU is restricted to the duty paid on the inputs or the capital goods by them equivalent to the additional duty of customs on like goods or the actual additional duty of customs paid by the 100% EOU equivalent to the additional duty of customs on like goods on the inputs or the capital goods whichever is less. This view has been upheld by the Commissioner (Appeals). However, the Larger Bench of the Tribunal in the case of Vikram Ispat has inter-aliea held that the clearances of goods by 100% EOU are not imports as defined under Section 2 (23) of the Customs Act; the duty paid on removal of goods manufactured from 100% EOU is only excise duty; once it is held what is paid, is excise duty, the question of dissecting the said duty into different components such as basic customs duty , auxiliary duty, additional duty of customs or any other customs duty does not arise. Having held as above, the method of determining and extent of credit has been prescribed as under:
17. The question then arises is how to determine the?. quantum of Modvat credit available to the manufacturer in respect of the goods procured from a 100% E.O.U. The only method, which, we feel, is available to the Revenue is as suggested by the learned Counsel, i.e. ascertain firstly the additional duty of customs leviable on like goods, if imported into India from outside India; ascertain the actual amount of duty paid by the 100% E.O.U. on the goods cleared to any part in India under Notification No. 2/95; after ascertaining these two elements the Modvat credit has to be allowed to the manufacturer on the basis of the first proviso to notification No. 5/94-C.E. As per first proviso to this notification credit shall be restricted to the extent of duty which is equal to the additional duty leviable on like goods. If the additional duty is less than the actual duty paid on the inputs cleared from 100% E.O.U., the manufacturer in India shall be eligible only for the credit equivalent to the additional customs duty. On the other hand if the duty actually paid by 100% E.O.U. on inputs cleared by them is less than the additional duty of customs payable on like goods the manufacturer shall be eligible only to the extent of actual duty paid by 100% E.O.U. The reading of first proviso to notification No. 5/94 does not indicate at all that the credit of specified duty shall be restricted to the components of additional customs duty actually paid by 100% E.O.U. as excise duty. Had this been the intention of the Government, the proviso would not have been termed in the present form. In that situation the proviso should have provided that the credit of specified duty shall be restricted to the extent of portion of excise duty which is equivalent to the additional duty of customs paid by the 100% E.O.U. The phrase equivalent to the duties of excise specified under (i) & (ii) above paid on such inputs" refers to the payment of (a) duty of excise under the Central Excise Act and (b) additional duty of excise under the Additional Duties of Excise (Textiles and Textile Articles) Act. If the Additional Customs duty leviable on like goods includes any other excise duty, such as duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Modvat Credit will not be available in respect of such duty.
7. In other words, the Larger Bench has held that the entire duty paid by the 100% EOU should be treated as one amount and the same should be compared to the additional duty of customs payable if like goods were to be imported and of these two amounts, whichever is less shall be available as modvat credit to the recipient unit. In the present case, undisputedly, the amount of additional customs duty leviable on like goods imported is less than the total duty of excise paid by the 100% EOU which supplied the inputs to the appellant.
8. In view of the above, there is no short-levy as held by the authorities below. In view of the above, the orders of the lower authorities are set aside and the appeal is allowed with consequential relief as per law.
(M. Veeraiyan) Member (Technical) scd/ 5