2013 (2) TMI 31 - HC - Central Excise

Tribunal Decision Upheld: Assessee Wins Modvat Credit Dispute

COMMISSIONER OF CENTRAL EXCISE Versus DELTA CORPORATION

The Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue. It determined that the respondent was entitled to avail ... Removal of Input - CENVAT credit under rule 57A – Rule 57F - Assessee is engaged in the manufacturing activity of “P.D. Pumps” - Department argue that assessee did not carry out any manufacturing activity on the PD pumps purchased exclusively from its sister concern before clearance - therefore, required to reverse such credit – Assessee contended that they had carried out manufacturing activity on the pump sets purchased by it and on the value addition had also paid excise duty – Assessee paid duty when they cleared final output and such duty was more than the credit taken Held that:- Following the decision in case of RICO AUTO INDUSTRIES LTD. (2006 (12) TMI 326 - CESTAT, NEW DELHI) that the rule contemplated removal of inputs in respect of which a credit of duty had been allowed where they are not used in relation to manufacture of final products with a condition that on their removal, the excise duty shall be paid to the tune of the credit availed under Rule 57A for such inputs. Even if were to be held that no process was undertaken on these goods, then obviously there was no liability to petitioner pay excise duty on the footing that these goods were manufactured by the appellant, because if they were already brought as inputs from other manufacturer and no further process was undertaken, they would obviously be not liable for payment of excise duty on the ground that manufacturing process was undertaken. Therefore, in either event, no duty liability arose on the part of the appellant In favour of assessee Issues:- Appeal against the judgement of the Customs Excise & Service Tax Appellate Tribunal- Entitlement to avail modvat credit on purchased PD pumps- Interpretation of relevant rules regarding modvat credit utilization- Application of case law in determining modvat credit eligibility- Challenge to the Tribunal's decision by the Revenue- Analysis of the Tribunal's decision and relevant provisionsEntitlement to avail modvat credit on purchased PD pumps:The case involved a dispute where the Revenue contended that the respondent, engaged in manufacturing PD Pumps, did not carry out any manufacturing activity on pumps purchased from its sister concern before clearance, thus not entitled to avail modvat credit. The respondent argued that manufacturing activity was indeed conducted on the purchased pumps, and excise duty was paid on the value addition. The Tribunal, in its decision, noted that the respondent had declared the inputs and outputs as PD pumps, and relied on a previous case to establish that modvat credit cannot be denied based on the nature of processes undertaken.Interpretation of relevant rules regarding modvat credit utilization:The Court analyzed Rule 57A of the Central Excise Rules, which allowed credit of duty paid on excisable goods used as inputs for manufacturing final products. The Revenue's argument was based on the absence of manufacturing activity on the purchased pumps. However, Rule 57F(1) provided options for utilizing inputs where credit was allowed, either in manufacturing final products or removing them for home consumption after payment of excise duty not less than the credit amount.Application of case law in determining modvat credit eligibility:The Tribunal referred to a case involving Rico Auto Industries Ltd., where it was established that if processed inputs were cleared after payment of duty higher than the credit taken, modvat credit could not be denied even if the processes did not amount to manufacturing. The Court highlighted that the Tribunal's decision in Rico Auto Industries Ltd. was upheld in subsequent proceedings, emphasizing the importance of excise duty paid being higher than the modvat credit availed.Challenge to the Tribunal's decision by the Revenue:The Revenue challenged the Tribunal's decision, arguing that since no manufacturing activity was conducted on the purchased PD pumps, modvat credit should not have been allowed. However, the Court examined the relevant rules and case law to determine the validity of the Tribunal's decision.Analysis of the Tribunal's decision and relevant provisions:The Court found that the Tribunal's decision was justified as the respondent had paid duty on the final output, exceeding the credit taken. The Court concluded that the respondent's actions aligned with the provisions of Rule 57F(1) regarding the utilization of inputs for manufacturing or removal for home consumption with duty payment equal to the credit amount. Consequently, the Court dismissed the appeal, ruling in favor of the assessee and against the Revenue based on the merits of the case and the applicable legal framework.