Custom, Excise & Service Tax Tribunal
Huhtamaki Ppl Ltd vs Silvasa on 20 October, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO.3
EXCISE Appeal No. 10310 of 2015
(Arising out of OIO-VAP-EXCUS-000-COM-004-14-15dated 26.11.2014passed by
Commissioner of Central Excise, Customs and Service Tax- Silvasa)
HUHTAMAKI PPL LTD ...Appellant
SURVEY NO 33/1, AT & POST; UMARKUI
SILVASSA U T OF DADRA AND NAGAR HAVELI
VERSUS
C.C.E. & S.T.-SILVASA ...Respondent
COMMISSIONER CENTRAL EXCISE, CUSTOMS & SERVICE TAX, SILVASSA, 4TH FLOOR, ADARSH DHAM BUILDING, VAPI DAMAN ROAD VAPI OPP. OLD TOWN POLICE STATION, VAPI-GUJARAT WITH EXCISE Appeal No. 10311 of 2015 (Arising out of OIO-VAP-EXCUS-000-COM-004-14-15dated 26.11.2014passed by Commissioner of Central Excise, Customs and Service Tax- Silvasa) KANUBHAI PATEL ...Appellant SURVEY NO 33/1, AT & POST; UMARKUI SILVASSA U T OF DADRA AND NAGAR HAVELI VERSUS C.C.E. & S.T.-SILVASA ...Respondent COMMISSIONER CENTRAL EXCISE, CUSTOMS & SERVICE TAX, SILVASSA, 4TH FLOOR, ADARSH DHAM BUILDING, VAPI DAMAN ROAD VAPI OPP. OLD TOWN POLICE STATION, VAPI-GUJARAT APPEARANCE:
Shri Prakash Shah & Mohit Raval Advocate appeared for the Appellant Shri Ashok Thanvi, Superintendent(Authorized Representative) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No. 12336-12337/2023 DATE OF HEARING: 11.10.2023 DATE OF DECISION: 20.10.2023 RAMESH NAIR As per the facts of the case, the adjudicating authority has denied the cenvat credit on Gravure Printing Cylinders received by the appellant duly duty paid and used the same in the manufacture of their final product on the ground that such cylinders were not liable to duty, therefore, the
2|Page E/10310-10311/2015 supplier has wrongly paid the duty consequently, cenvat credit on such duty which was not payable is not available to the appellant.
2. Shri Prakash Shah, learned counsel along with Shri Mohit Raval advocate, appearing on behalf of the appellant submits that firstly the Gravure Printing Cylinders was not exempted under any notification. The contention of the department is that the exemption on cylinder is covered by the Exemption entry in respect of Printing blocks and Printing Types which is absolutely incorrect for the reason that the Printing Blocks and Printing Types does not cover in its ambit the Printing Cylinders. Printing Cylinders has a different tariff entry which is not exempted. Accordingly, the supplier has rightly paid the excise duty on such Printing Cylinders.
Hence, the credit is admissible to the appellant. Without prejudice to the above, he further submits that even if it is assumed that the supplier is not required to pay the excise duty but since factually and undisputedly the supplier has paid the excise duty which has not been challenged by the Jurisdictional Officer of the supplier, the duty paid by the supplier stand good as per the law and the said duty is available as cenvat credit to the recipient of the goods. In support of his submission, he placed reliance on the following judgments:
CCE vs MDS Switchgear Ltd. 2008 (229) ELT 485 (SC) CCE vs Creative Enterprises 2009 (235) ELT 785 (Guj) affirmed by Hon‟ble SC in 2009 (243) ELT A120 (SC) CCE vs Nahar Granites Ltd. 2014 (305) ELT 9 (Guj.) CCE vs Nestle India Ltd. 2012 (275) ELT 49 (Bom) CCE vs CEGAT Chennai 2006 (202) ELT 753 (Mad) CCE vs Ranbaxy Labs Ltd. 2006 (203) ELT 213 (P &H) CCE & ST vs Kris Flexipacks Pvt Ltd 2023 (7) TMI 943 Sunrise Containers Ltd. 2022 (11) TMI 792-CESTAT-AHM
3|Page E/10310-10311/2015 Hanon Automotives Systems India Pvt Ltd. 2022 (7) TMI 10 CESTAT
- AHM CCE vsHylite Cables 2007 (212) ELT 284 (Tri. Adm.)
3. On the other hand, Shri Ashok Thanvi, Learned Assistant Commissioner (authorized representative) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submissions made by both the sides and perused the records. We find that from the facts of the case and the detailed submission made by the learned counsel, it prima facie appears that Printing Cylinders received by the appellant duly duty paid is not exempted. Therefore, the entire basis of the department fails.
However, without going into this issue in detail, we of the view that the appeal can otherwise be disposed of only on the ground that the assessment of the duty payment at the supplier‟s end has not been questioned or challenged by the jurisdictional departmental officer of the suppliers. As there is no evidence available on record that the payment of duty by the supplier was questioned/ challenged / disputed by their jurisdictional officer, in such case, the payment of duty is found to be legal and correct and consequently, the appellant‟s cenvat credit cannot be denied. This issue has been considered time and again. In the case of Creative Enterprises (Supra), the Hon‟ble Gujarat High Court in the facts that whether the activity of the manufacturer amounts to manufacture or otherwise to arrive at a conclusion that whether the goods are dutiable, following order was passed:
"6. When one goes through the order of the first appellate authority, it is apparent that the respondent has been held to be a manufacturer as defined in Section 2(f) of the Central Excise Act, 1944. The appellate authority has taken into consideration the activities carried on by the respondent-assessee. The Tribunal is justified in holding that if the activity of the respondent-assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture."
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5. The above judgment has been upheld by the Hon‟ble Supreme Court as reported in Commissioner vs Creative Enterprise 2009 (240) ELT A120 (SC).
6. In another judgment of the Jurisdictional High Court of Gujarat in the case of Nahar Granties Ltd., the Hon‟ble court has passed the following order:
"7. Rule 3 of the Cenvat Credit Rules, 2004 allows a manufacturer or producer of final product or a provider of taxable service to take Cenvat credit of the duty of excise specified in the First Scheduler to the Excise Tariff Act. Rule 4 of the Cenvat Credit Rules, 2004 lays down the conditions for allowing Cenvat credit. Sub-rule (1) thereof provides that Cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Proviso to sub-rule (1) puts certain limitations on such immediate availability of Cenvat credit. We are however, not concerned with the proviso.
8. In terms of Rules 3 and 4 of the Cenvat Credit Rules, 2004, a manufacturer would be entitled to avail the Cenvat credit in respect of the inputs used for the manufacture of a final product or in providing taxable service of the excise duty specified in First Schedule to the Excise Tariff Act. Insofar as the respondent is concerned, he had purchased the inputs and utilised the same for manufacture of a final product. Such goods were duty paid. Rules 3 and 4 of the Cenvat Credit Rules, 2004, thus would enable him to avail the Cenvat credit.
It is a different thing that the supplier of the goods to the respondent paid excise duty on such product under mistaken belief. In law as declared by the Supreme Court in case of Collector of Central Excise, Patna v. Tata Iron and Steel Co. Ltd. (supra), no duty was payable on such product. Strictly speaking therefore, such amount deposited by the original manufacturer would not partake the character of excise duty. However, when the department did not dispute the classification of such manufacturer, accepted the declarations and duties, Cenvat credit on such duty cannot be declined to the purchaser of the goods who otherwise fulfilled all conditions tor availing Cenvat credit thereof.
9. Case is substantially similar to one before the Supreme Court in case of MDS Switchgear Ltd. (supra). In the said case, the Tribunal while accepting the department‟s allegation of inflation of the value of intermediate goods to load the assessable value, observed that if the department was of the opinion that the value of the final product was depressed, it could have charged the original manufacturer unit in under-invoicing their product. This was however, not done. Valuation was duly approved and the payment of duty was also accepted. The Tribunal further observed that "We find absolutely no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into deposit of duty. There is no legal basis for such presumption. The rules entitled the receipt manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers in charge of recipient unit."
10. This judgment by speaking order was upheld by the Supreme Court.
11. In the result, tax appeal is dismissed."
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7. The Hon‟ble Bombay High Court also dealing with the same issue in the case of Nestle India Ltd (Supra), passed the following order:
Heard learned Counsel for the parties.
2. A common question is involved in all these appeals. The question is whether; if, excise duty is levied on an assessee at place "A" and Modvat credit is sought to be availed of at place "B", it is open to the Authorities at place "B" to deny credit on the ground that no duty was payable at place "A".
3. We have accordingly re-framed question no. 4 at the time of admission of the appeals as above in all these cases. The common facts are that job works were undertaken at one place outside Goa and excise duty was paid on the goods before removing them from that place. These goods were brought to Goa and the factory owners sought to avail Modvat credit on the basis that the duty was already paid in the place outside Goa for the job work. This credit was sought to be denied by the Revenue on the ground that the job work did not attract payment of duty at all, and, therefore, the payment of duty outside Goa was of no consequence. Therefore, as a result the assessee cannot claim any credit in Goa.
4. Eventually, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), took a view that the point is covered by a decision of the CEGAT judgment in the case of Owens Bilt Ltd. v. Commissioner of Central Excise, Pune reported in 1998 (101) E.L.T. 642 and therefore, dismissed the appeal filed by the Revenue.
5. Mr. Ferreira, learned Assistant Solicitor General for the appellant, submitted that the scheme of law is that if, excise duty is collected, a person at subsequent place is entitled to claim Modvat credit.
According to Mr. Ferreira, learned Assistant Solicitor General, this can be so if, duty is validly collected at an earlier stage. In this case duty was not payable at all at the place outside Goa, since no duty can be levied on job work but only on manufacture and, therefore, the respondents are not entitled to claim any Modvat credit. Though this submission appears to be reasonable and in accordance with law, we find it not possible to entertain this submission in the facts of the present case since at no point of time the Revenue questioned the applicability of the excise duty at the place outside Goa. Those assessments have been allowed to became final and the goods have been removed from the jurisdiction of the Excise Officer at that place and brought to Goa. Now, in Goa it will not be permissible to allow the Revenue to raise the contention that the assessee in Goa cannot claim Modvat credit in Goa because duty need not be paid outside Goa.
6. As we have observed that the assessment is allowed to be final, it would not be legal and proper to allow the Revenue to raise the question on the basis of Modvat credit. Indeed, now the payment of excise duty must be treated as valid, therefore, the claim of Modvat credit must be treated as excise duty validly paid.
7. In this view of the matter, the appeals are dismissed. No order as to costs."
8. The Hon‟ble Madras High Court also dealing with the case of Modvat under the erstwhile Central Excise Rules, 1944 passed the following order:
"By this reference application under Sec. 35H(1) of the Central Excise Act, 1944, the applicant, viz. Commissioner of Central Excise, Chennai-I Commissionerate, Chennai has framed the following question to be referred to us for our opinion :
6|Page E/10310-10311/2015 Is the Hon‟ble Tribunal right in ruling that the "1. assessee can avail the exemption available in Notification or pay duty, when the input in question in wholly exempt from duty vide Notification No. 5/99, dated 28-2-1999 and when Rule 57C of Central Excise Rules 1944 is categorical in placing an embargo on taking of credit on inputs if the final product is wholly exempt from payment of duty?"
2.Learned standing Counsel for the department, Shri Veeraraghavan, has contended that since the raw material of the assessee had been exempted from duty vide Notification dated 28-2-1999, he could not claim Modvat credit. However, from the perusal of the impugned order, it appears that, in fact, duty was paid by the assessee‟s supplier despite the aforesaid notification. It may be that the supplier was unaware of the exemption notification or it may be that some condition of the notification was not complied with but, nevertheless, the fact remains that duty was paid by the assessee‟s supplies. This factual position is not disputed.
3.Rule 57A(1) of the Central Excise Rules reads as follows :
"Rule 57A. Applicability. - (1) The provisions of this section shall apply to such finished excisable goods (hereafter, in this section, referred to as the final products) as the Central Government may, by notification in the Official Gazette, specify in this behalf for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereafter, in this section, referred to as the specified duty) „paid‟ on the goods used in the manufacture of the said final product (hereinafter, in this section, referred to as the inputs)".
4.A perusal of Section 57A(1) shows that the terminology used therein is „paid‟ and not „payable‟. This distinction, in our opinion, is important because it indicates that we have to take into account the factual state of affairs. In other words, we have to consider whether the duty has actually been paid on the raw material and not whether duty was payable or not. In the present case, it is not in dispute that the assessee‟s supplier in fact that paid the duty on the raw materials supplied to the assessee and the department accepted this excise duty. The concept of Modvat is that if the raw material suffered duty then relief should be given so far as the excise duty on the final product is concerned. For instance, if a manufacturer of coat purchases cloth on which the manufacturer of cloth has paid excise duty say Rs. 20/-, then if the excise duty on the coat is say Rs. 100/-, the sum of Rs. 20/- has to be deducted from it and only Rs. 80/- is payable by the coat manufacturer. This is no doubt a rough and ready example but it illustrates the concept of Modvat. Since the very concept of Modvat is to mitigate double taxation, if the raw material has suffered excise duty then relief should be granted in respect of duty payable on the final product.
5.In view of the above discussion, we do not find any error of law in the order of the Tribunal. Hence, we reject the reference application."
9. The Hon‟ble Punjab & Haryana High Court also on the fact that if at all the duty is not payable, however the same was paid whether the credit can be allowed, the Hon‟ble Court passed the following order:
"This order will dispose of C.E.A Nos. 9, 10 and 86 of 2005, as similar question of law is involved therein. However, the facts are being taken from C.E.A. No. 9 of 2005.
2. The revenue has approached this court by filing the present appeal against the order passed by Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for short, „The Tribunal‟), arising out of Appeal No. E/1078/2004-NB-B, dated June 9, 2004, raising the following substantial questions of law:
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"(i) Whether the Tribunal is justified in giving an interpretation to
Rule 57F(4) which is not intended?
(ii) Whether it is legal to give credit of amount paid when it was
not required to be paid by virtue of Notification No. 214/86-CX, dated 25-3-1986."
3. Brief facts of the case are that the assessee sent certain goods for job work. As per notification, the job worker was exempted from payment of duty. However, still he paid the duty and the assessee had availed Modvat credit thereof on account of payment of such duty by the job worker, claim of which was disallowed by the Commissioner which order was reversed by the Tribunal. It is not disputed that duty, the Modvat credit of which was availed of by the respondent was paid by the job worker even though not required to pay. The respondent has taken the credit of duty, which was actually paid. We do not dilate much on the issue as this court has earlier dismissed an appeal filed by the revenue raising the similar question of law in C.E.A No. 51 of 2005 titled as Commissioner, Central Excise Commissionerate, Chandigarh v. M/sPunjab Anand Lamp Industries Ltd., Mohali, decided on 4-7-2006.
4. Accordingly, the present appeal is dismissed."
10. This bench of this Tribunal also dealing with the identical issue in the case of Kris Flexipacks Pvt Ltd. (supra) wherein even the product was also same, passed the following order:
"The issue involved in the present case is that whether the respondent is entitled for Cenvat credit in respect of Excise Duty paid on capital goods namely „Engraved Ms Copper Plated Rollers‟ in a case where as per the department, the said Capital Goods were exempted from payment of Central Excise Duty under Notification No. 49/2006-CE dated 30.12.2006. The case of the department is that since the said Capital Goods were exempted from payment of Excise Duty under an unconditional Notification, the supplier was not supposed to pay the duty, whatever duty was paid cannot be treated as Excise Duty in terms of Section 3 of Central Excise Act,1944. Consequently, the respondent cannot take credit of any amount which is not a payment of duty in terms of Section 3, the department also placed reliance on the Circular No. 940/01/2011-CX dated 14.01.2011 though the Adjudicating Authority has denied the Cenvat Credit but Learned Commissioner (Appeal), in appeals filed by the respondent allowed the appeal therefore the present appeal filed by the revenue. The respondent also filed a cross objection.
2. Shri Tara Prakash, Learned Deputy Commissioner (AR), appearing on behalf of the revenue submits that since the capital goods were exempted under Notification No. 49/2006-CE dated 30.12.2006, whatever, duty paid by the supplier cannot be treated as duty whereas the Cenvat credit is available only in respect of Excise duty paid in terms Section 3 of Central Excise Act, 1944. Therefore, the appellant is not eligible for Cenvat credit in this position. The Learned Commissioner (Appeals) has erred in allowing the appeal of the respondent, which deserves to be set aside and revenue‟s appeal be allowed.
3. On the other hand Shri Prakash Shah, Learned counsel with Shri Mihir Mehta, Advocate appearing for the respondent at the outset submits that the supplier have made the payment of duty under self- assessment procedure. The said assessment of duty payment was not objected with by the department, therefore, the said assessment
8|Page E/10310-10311/2015 attained finality. Once the duty payment has been accepted by the department and no objection was raised, it cannot be said that the duty paid by the supplier is not a duty of excise. he submits that even in case, where the excise duty is admittedly not payable but the supplier of the goods discharge the excise duty and the said payment is not objected, no objection can be raised at the recipient and in this regard he placed reliance on the following judgments:
Commissioner of Central Excise & Customs vs MDS Switchgear Ltd., 2008 (229) E.L.T. 485 (S.C.) Commissioner of Central Ex. & Customs, Surat - III vs Creative Enterprises, 2009 (235) E.L.T. 785 (Guj.). Upheld by Hon'ble Supreme Court in 2009 (243) E.L.T. A120 (S.C.) Commissioner of C. Ex., Ahmedabad III vs. Nahar Granites Ltd., 2014 (305) E.L.T. 9 (Guj.) Commissioner of Central Excise, Goa vs. Nestle India Ltd., 2012 (275) E.L.T. 49 (Bom.) Commissioner of Central Excise, Chennai I vs. CEGAT, Chennai, 2006 (202) E.L.T. 753 (Mad) Sunrise Containers Ltd. and Ramesh Pawle vs. C.C.E. & S.T. -
Vapi, 2022 (11) TMI 792 - CESTAT Ahmedabad Hanon Automotives Systems India Private Limited vs. C.C.E. - Ahmedabd -II, 2022 (7) TMI 10- CESTAT Ahmedabad Commr. Of C. Ex. & S.T., Jaipur - I vs. DCM Shriram Consolidated Put Ltd. reported in 2017 (349) E.L.T. 326 (Tri - Del.) Neuland Laboratories Ltd. vs. Commissioner of C. Ex., Hyderabad - I reported in 2015 (317) E.L.T. 705 (Tri. - Bang.) Commissioner of Central Excise, Chandigarh vs. Ranbaxy Labs Ltd. reported in 2006 (203) E.L.T. 213 (P & H) GTL Infrastructure Ltd. vs. Commissioner of Central Excise, Mumbai reported in 2016 (45) S.T.R. 389 (Tri. - Mumbai) 3.1 Without prejudice he also submits that appellants goods are not exempted, as the exemption was rescinded vide Notification No.19/1996-CE dated 23.07.1996 by the changes as per the Union Budget of 1996-97. For this reason also the entire allegation of the department is incorrect. Hence the credit on that count also cannot be denied.
3.2 He further submits that the recipient of the goods is entitled to avail Cenvat credit of the duty paid by the supplier manufacturer as long as it is not proved that the duty paid by the supplier manufacturer was refunded to them. In this support he placed reliance on following judgment:
Commissioner of C. Ex., Vadodara - I vs. Hylite Cables, 2007 (212) E.L.T. 284 (Tri.- Ahmd.) Evergreen Engineering Co. Pvt. Ltd. vs Commissioner of C. ex., Mumbai reported in 2007 (215) E.L.T. 134 (Tri. - Mumbai) 3.3 He further submits that the Show Cause Notice for the period of October-2008 to July-2012 was issued on 09.05.2013 and a major part of the demand is beyond one year, which is hit by limitation, as there is no suppression of fact on the part of the respondent. On this ground also a major amount that is within the extended period, the demand of Cenvat credit is not sustainable.
4. We have carefully considered the submission made by both the sides and perused the records. We find that the case can be decided on the first issue assuming the Capital Goods received by the appellant is exempted at the suppliers and we find there is no dispute on the fact that the supplier are registered with Central Excise, they have duly discharged the payment of Excise duty, they have issued invoices and filed their returns to their Jurisdiction Central Excise Officer. The
9|Page E/10310-10311/2015 Jurisdictional Central Excise officer of supplier has not whisper a word about alleged wrong assessment of duty. The department had jolly well accepted the Act of the supplier that is payment of Excise Duty.
The self-assessment of payment of excise duty has attained finality as no objection was raised by the department against the supplier. Therefore, rightly or wrongly, if the assessment at the supplier‟s end has been accepted and no objection was raised, the same cannot be disputed at the recipient of goods for availment of Cenvat credit by the recipient. Since, the payment of duty has been assessed and the same was not challenged the duty was paid by the supplier is in terms of Section 3 of Central Excise Act, 1944 and this duty is clearly, legally available as Cenvat credit to the recipient.
4.1 Moreover, if the department is of the view that the supplier was not supposed to pay the duty in such case, the jurisdiction Officer at supplier end should have issued a Show Cause Notice for recovery of such amount under Section 11D of Central Excise Act, 1944, which was not done by the department. This further reinforce the claim of the respondent about their Cenvat credit. This issue has been considered time and again in various judgments:
(a) In the case of MDS switchgear Ltd, the Hon‟ble Supreme Court has passed the following order:
"Revenue is aggrieved against the order passed by the Customs, Excise & Gold (Control) Appellate Tribunal (for short, 'the Tribunal') whereby and where under the Tribunal has reversed the order-in-original passed by the Commissioner of Central Excise holding that the process followed by the Revenue from the issue of show cause notice to the determination of the liability is not based on relevant law.
2. M/s. MDS Switchgear Ltd., D-4, MIDC, Jalgaon (hereinafter referred to as 'the assessee') and M/s. MDS Switchgear Ltd., A-2, MIDC, Malegaon Village, Sinnar (hereinafter referred to as 'the supplier') are the sister concerns and are engaged in the manufacture of circuit-breakers falling under Chapter Heading No. 85 of Central Excise Tariff Act, 1985. They were also availing of Modvat facility under the Central Excise Rules, 1944 (for short, 'the Rules')
3. The assessee was receiving 'tripstar MCB's single pole' of various configurations from their unit at Sinnar in semi-finished condition. After carrying out certain operation, they have cleared the goods at lower value than the landing cost of semifinished received from their unit, viz., MDS Switchgear, Malegaon, Sinnar. The Revenue, after a detailed verification of record, came to the conclusion that the cost of semi-finished goods supplied by their sister concern is arrived at by adding the raw material cost, direct/indirect labour cost, average overheads, notional profit and Modvat element. Further, the cost so arrived is rounded off to the next higher figure, i.e., for item Code No. T161B06S, the cost of Rs. 56.68 has been rounded off to Rs. 60/- whereas the assessable value declared by the assessee is ranging between Rs. 45.20 to 52.47.
4. The Revenue issued a show cause notice dated 4-11-1999 to the assessee being of the opinion that they have deliberately entered into practice of raising value of semi-finished goods by adding Modvat element and rounding off the value to higher figure so as to pass on the excess Modvat credit. The said notice was, thus, issued to show cause as to why Modvat credit amounting to Rs. 13,08,701/- should not be disallowed under Rule 57-I of the Rules read with proviso to Section 11A(1) of the Central Excise Act, 1944 and to show cause as to why interest and penalty should not be levied and as to why plant, machinery, building etc. should not be confiscated.
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5. By the order-in-original dated 30th October 2000, the Commissioner of Central Excise & Customs, Aurangabad confirmed the demand of Rs. 13,08,701/- under Section 11A of the Act and imposed a penalty equivalent to the amount of duty under Section 11AC of the Act and also a penalty of Rs. 1,00,000/- under Rule 173Q of the Rules. Recovery of interest under Section 11AB of the Act was also ordered.
6. Aggrieved by the above order-in-original, the assessee preferred an appeal before the Tribunal which has been accepted by the impugned order. Revenue, being aggrieved, has filed the present appeal.
7. The Tribunal has come to the conclusion that in fact there was no loss of revenue. It accepted the appeal by recording the following reasons :
"Reasons given by the appellants for the alleged inflation of the value of the intermediate goods are logical. What was required of the Commissioner was to examine the quantum of the loading of the assessable value by the Modvat credit on the earlier inputs. That exercise has nowhere been done. If the department was of the opinion that the value of the final product was depressed, then they could have charged the Jalgaon unit with under- invoicing of their product. That has also not been done. The valuation as given by the Sinnar unit was duly approved by the department and the payment of duty was also duly accepted. We find absolutely no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into 'deposit of duty'. There is no legal basis for such presumption. The rules entitled the receipt manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers in charge of recipient unit *2000 (38) RLT 179+."
8. Counsel appearing for the Revenue could not assail any of the findings recorded by the Tribunal.
9. That being the position, we agree with the view taken by the Tribunal and find no merit in these appeals which are dismissed leaving the parties to bear their own costs."
(b) The Hon‟ble Gujarat High Court dealing with the identical issue in the case of Creative Enterprises (Supra) passed the following order:
"Originally when the appeal was filed, the following question was proposed by appellant-revenue.
(a) Whether in the facts and circumstances of the case, the Tribunal is justified in holding that the respondent could have availed of Modvat credit in respect of the goods which could not undergo the process of manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944 and in respect whereof, the respondent-assessee had paid duty on its own though not required under the law to pay?
The same was subsequently re-framed and the re-framed question reads as under :
(1) Whether, in the facts and circumstances of the case, the tribunal is justified in granting benefit of Modvat credit despite the final product not being as a result of activity of manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944?
2. Heard Mr. H.C. Buch, learned Additional Standing Counsel for the appellant- revenue. The learned counsel has read extensively from the show cause notice and the order made by the adjudicating authority to contend that the respondent was not a manufacturer but was merely an agent of Dr. Beck & Company (I) Limited. It was submitted that in the circumstances, in absence of any independent manufacture by the respondent, there was no question of the respondent being entitled to Modvat credit under Rule 57-I(1)(iii) of the Central Excise Rules, 1944. That the Tribunal had erroneously placed reliance on its own decision in case of the 11 | P a g e E/10310-10311/2015 respondent assessee despite the fact that the said order of Tribunal dated 28-10- 2003 had been challenged by way of Tax Appeal Stamp No. 815 of 2004. The learned counsel has also placed reliance on the Apex Court order in case of Thiagaraja Engineering Enterprises v. Assistant Collector of Central Excise, 1996 (88) E.L.T. 312 (S.C.) = (1997) 10 SCC 241.
3. Against the order made by the adjudicating authority, the respondent assessee carried the matter in appeal and the first appellate authority allowed the appeal after recording following facts.
4. I have examined the records of the case and the submissions made in memorandum of appeal as well as at the time of personal hearing. The issue for determination is whether the activity of re-packing from bulk packs to lower packs amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944 or not. I find that the appellant has received "Elmo Luft 1A" falling under CSH No. 3208.40 in bulk packs from Dr. Bex & Co. (I) Ltd. and with the help of special purpose machines prepared small marketable packages and cleared the same on payment of duty under cover of invoice. The department had granted the C.Ex., registration to the appellant. In the present case, I find that the appellant had received the goods in bulk, carried out testing/ inspection, packed in smaller containers with automatic machinery, followed the rules and procedure strictly and cleared the goods on payment of duty. The expression 'manufacturer' has been defined in Section 2(f) of the C. Ex. Act, 1944, according to which it includes any process-
(i) Incidental or ancillary to the completion of a manufactured product, and
(ii) which is specified in relation to any goods in the Section of Chapter Notes of the Schedule to the Central Excise Act, 1985 as amounting to manufacture.
The aforesaid definition endows a wider content to the expression 'manufacture' as several process which would not ordinarily be understood as amounting to manufacture are specifically included therein, held by the Apex Court in the cases of Prestige Engg. (I) Ltd. v. Collector - 1994 (73) E.L.T. 497 (S.C.) and Collr. v. S.D. Fine Chemicals P. Ltd. - 1995 (77) E.L.T. 49 (S.C.). In the appellant's case, though the process involved is of repacking, but repacking with conscious and specific end-use in view. In other words, repacking makes the products marketable. In the cases of J.K. Synthetics Ltd. v. Collector - 1998 E.L.T. 310 (T) and Ponds India Ltd. v. Collector - 1993 (63) E.L.T. 3 (Mad.), it is held that "Manufacturing process continues till the article is put in suitable packaging to smaller packages. I find that the appellant had availed Modvat credit of Rs. 1,70,53,294.00 on the goods received in bulk packs whereas the appellant paid excise duty amounting to Rs. 1,95,03,939.00 on the final product i.e. the re-packed goods in small packs. Accordingly, the process has to be treated as amounting to manufacture.
5. With regard to Modvat credit on duty paid inputs, I find that the appellant has received duty paid raw materials, the said raw material has been received in the factory and were utilized in the manufacture of final products. In view of this and considering the position as indicated above, I set aside the impugned order and allow the Modvat credit of Rs. 1,70,53,294.00. I also set aside the penalty of Rs. 5,00,000/- and demand of interest under Section 11AB of the Central Excise Act, 1944.
4. The Tribunal in the impugned order after recording facts in paragraph No. 2 of its order has noted that in assessee's own case in respect of same issue, for an earlier period, it was held by Tribunal that the assessee cannot be denied modvat credit by observing as under :
4. The learned Advocate appearing on behalf of the respondents submits that in respect of the same issue and in the same assessee's case, the Tribunal has held that the assessee cannot be denied the Modvat credit. Vide final order No. CB/470/03-WZB dated 28-10-2003, the Tribunal held as under:-
"We have perused the records and have considered the submissions made by both sides. The present order is clearly unjust and cannot be allowed to stand. The appellants are right in their contention that the finding regarding 12 | P a g e E/10310-10311/2015 manufacture applies equally to levy of duty as well as eligibility to Modvat credit. It there was no manufacture, there could be no payment of duty also. There is no dispute that the appellants had paid a higher amount of duty on the goods than the credit taken. If the credit taken was not eligible, what was required was only to adjust the duty paid against that credit."
5. It is necessary to take note of the fact, to complete narration of facts, that the earlier order of Tribunal was challenged by way of Tax Appeal Stamp No. 815 of 2004 which came to be disposed of on 20-7-2004 for non-removal of office objections. Till date, no steps have been taken to have the said appeal restored to file.
6. When one goes through the order of the first appellate authority, it is apparent that the respondent has been held to be a manufacturer as defined in Section 2(f) of the Central Excise Act, 1944. The appellate authority has taken into consideration the activities carried on by the respondent-assessee. The Tribunal is justified in holding that if the activity of the respondent- assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture.
7. In the aforesaid set of facts and circumstances of the case in light of concurrent findings of fact recorded after appreciating the evidence on record by both Commissioner (Appeals) and the Tribunal, no question of law, much less a substantial question of law, arises out of impugned order of Tribunal. The appeal is accordingly dismissed."
4.2 The above judgment of Hon‟ble Gujarat High Court has been affirmed by the Hon‟ble Supreme Court, reported at Commissioner of Central Excise & Customs, Surat-III vs. Creative Enterprises 2009 (243) E.L.T. A120 (S.C.). There are many more judgments passed on this issue, which is directly on the issue in hand. According to which, even though the payment of duty is disputed, unless and until, any action for challenging the assessment of the supplier is taken, Cenvat Credit at the recipient end cannot be disputed, on the ground that the supplier was not supposed to pay duty, may be for various reasons that either the goods is not amount to manufacture, or exempted etc. 4.3 In view of the above legal position, we are of the clear view that the Learned Commissioner (Appeals) has rightly allowed the Cenvat credit on capital goods to the respondent. Hence, the order of the Learned Commissioner is absolutely legal and correct, which does not require any interference. Accordingly, the same is upheld.
5. Revenue‟s appeals are dismissed. Cross Objection filed by the respondent also stands dispose of.
From the above catena of judgments by various Hon‟ble High Courts and following the same by this Bench of the Tribunal, it is settled that even if Excise duty is not payable on the product for any reason but the assessee paid the excise duty and said payment of duty is not challenged or questioned at the manufacturers end, no question can be raised as regard availment of the credit by the recipient of the goods. Accordingly, in the present case also, being the similar fact involved, the cenvat credit cannot 13 | P a g e E/10310-10311/2015 be denied merely on the ground that the supplier was not required to pay the duty. Therefore we set aside the impugned order and allow the appeal.
(Pronounced in the open court on 20.10.2023) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Neha