2015 (11) TMI 316 - AT - Central Excise

Tribunal Upholds Modvat Credit Eligibility for Third-Party Brand Goods

Commissioner of Central Excise, Pondicherry Versus Shrushthi Plastics (P) Ltd.

The Tribunal upheld the impugned order, rejecting the Revenue's appeal. It affirmed that the respondent was eligible for Modvat credit on inputs used in ... Simultaneous availment of SSI exemption and modvat credit - Held that:- As per Notfn 8/99 as amended for the purpose of determining the aggregate value of clearances by a manufacturer, the clearance value of goods bearing the brand name of other persons are excluded. On the identical issue, in the case of Nebulae Health Care Ltd. Vs CC Chennai (2006 (8) TMI 74 - CESTAT, CHENNAI), this Tribunal after taking into consideration the Supreme Court judgement in the case of Commissioner Vs Ramesh Food Products (2004 (11) TMI 103 - SUPREME COURT OF INDIA) and the Tribunal's Larger Bench decision in the case of Kamani Foods Vs Collector (1994 (1) TMI 109 - CEGAT, NEW DELHI) allowed the appeal of the assessee. We find that the Revenue preferred appeal against this Tribunal order and the Hon'ble Supreme Court in their order [2015 (11) TMI 95 - SUPREME COURT] in the case of CCE Chennai Vs Nebulae Health Care Ltd. dismissed the Revenue appeal and upheld this Tribunal's order. - appellants have rightly paid excise duty on the goods bearing the brand name of 'HLL' and accordingly filed declaration to avail Modvat credit on the inputs used in the manufacture of branded goods belonging to another person which is outside the scope of SSI exemption under Notfn 8/99. - respondents are eligible for Modvat credit on the inputs used in the manufacture of goods bearing the brand name of 'HLL' - Decided against Revenue. Issues Involved:1. Simultaneous availment of SSI exemption and Modvat credit.2. Eligibility for Modvat credit on goods bearing the brand name of others.3. Interpretation of relevant notifications and Supreme Court judgments.Issue-wise Detailed Analysis:1. Simultaneous Availment of SSI Exemption and Modvat Credit:The case revolves around the simultaneous availment of SSI exemption and Modvat credit on goods bearing the brand name of others. The adjudicating authority initially dropped the proceedings, which was upheld by the Commissioner (Appeals). However, the Tribunal, in its first round of litigation, allowed the Revenue's appeal, confirming the demand of Rs. 7,02,609/- along with interest and waived the penalty. The respondent-assessee challenged this order in the High Court, which remanded the case back to the Tribunal for fresh consideration.2. Eligibility for Modvat Credit on Goods Bearing the Brand Name of Others:The Revenue argued that as per erstwhile rules, the assessee could not avail both SSI exemption and Modvat credit. They cited various judgments, including the Supreme Court's decision in Ramesh Food Products and the Tribunal's Larger Bench decision in Kamani Foods. On the other hand, the respondent contended that they availed SSI exemption on their own products and paid excise duty on branded goods manufactured on a job work basis for Hindustan Lever Ltd. (HLL). They filed necessary declarations to avail Modvat credit on inputs used in manufacturing these branded goods. The Tribunal found that the adjudicating and appellate authorities correctly allowed the benefit, as the goods bearing the brand name of others were excluded from the aggregate value of clearances for home consumption under Notification 8/99.3. Interpretation of Relevant Notifications and Supreme Court Judgments:The Tribunal referred to its own decision in Nebulae Health Care Ltd. and the Supreme Court's dismissal of the Revenue's appeal in that case. The Supreme Court clarified that goods bearing the brand name of third parties are excluded from the aggregate value of clearances for SSI exemption purposes. The Court held that such goods are not eligible for exemption but are subject to excise duty, allowing the manufacturer to claim Modvat credit on inputs. The Tribunal applied this rationale to the present case, concluding that the respondent correctly paid excise duty on branded goods and availed Modvat credit on inputs, which is outside the scope of SSI exemption under Notification 8/99.Conclusion:The Tribunal upheld the impugned order, rejecting the Revenue's appeal. It affirmed that the respondent was eligible for Modvat credit on inputs used in manufacturing goods bearing the brand name of HLL, following the Supreme Court's judgment. The Tribunal found no infirmity in the lower authorities' decisions and dismissed the Revenue's appeal.