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of <h1>Assessee's Duty Liability under Notification No. 1/95: High Court Remands Case for Reconsideration</h1> The High Court held that the assessee was liable to pay duty under Notification No. 1/95 as they did not procure goods directly from the factory of ... 100% EOU - whether the assessee was eligible to clear the inputs, in respect of which, MODVAT credit had been availed without payment of duty against a CT-3 certificate issued by a 100% export oriented unit (EOU) and as to whether the duty, if payable, was required to be equivalent to the amount of Modvat credit initially availed of? HELD THAT:- The matters require reconsideration by the Tribunal. Though it may be true that the decision was not available when the Tribunal decided and passed the impugned common order, nevertheless, when the matter travelled upto the Supreme Court in the case of LAKSHMI AUTOMATIC LOOM WORKS LTD. VERSUS COMMR. OF C. EX., TRICHY [2008 (10) TMI 57 - CESTAT CHENNAI], and the matter was remanded to the High Court of Karnataka for a fresh consideration, we are of the view that the Tribunal should have a fresh look into the matter taking note of the legal position as laid down in the case of THE COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II VERSUS M/S SOLECTRON CENTUM ELECTRONICS LTD. [2014 (10) TMI 596 - KARNATAKA HIGH COURT] Division Bench of this Court in the case of THE COMMISSIONER OF GST & CENTRAL EXCISE, THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. VELVETTE INTERNATIONAL PHARMA PRODUCTS LTD., (HERBAL DIVISION) , M/S. HCL INFOSYSTEMS LIMITED, UNIT III [2018 (8) TMI 1506 - MADRAS HIGH COURT], remanded a similar issue for a fresh consideration before the Tribunal. The matters are remanded to the Tribunal for a fresh consideration - Appeal allowed by way of remand. Issues:1. Interpretation of Notification No. 1/95 regarding procurement of goods by 100% EOUs.2. Liability to pay duty on bought out goods cleared to 100% EOUs under Notification 1/95.3. Tribunal's decision-making process and reference to the Larger Bench.Issue 1: Interpretation of Notification No. 1/95The High Court analyzed the eligibility of the assessee to clear inputs without duty payment under MODVAT credit against a CT-3 certificate issued by a 100% EOU. The Tribunal held that the condition in Notification No. 1/95 required 100% EOUs to procure goods directly from the factory of manufacture. Since the assessee did not comply with this condition and obtained goods from the assessee, the benefit of the notification was deemed unavailable, rendering the assessee liable to pay duty.Issue 2: Liability to pay duty on bought out goodsThe Tribunal considered whether the duty payable by the assessee should be equivalent to the Cenvat credit initially availed. Referring to the Proviso to Rule 57F(1) of the Central Excise Rules, it was established that the duty payable should not be less than the credit allowed for inputs. The Tribunal applied the decision in CCE, Vadodara v. Asia Brown Boveri Ltd. for the relevant period. However, after amendments to Rule 57AB and Rule 3(4) of the Cenvat Credit Rules, 2001, the Tribunal found the assessee liable to pay duty but deleted the penalty imposed.Issue 3: Tribunal's decision-making processThe High Court noted conflicting decisions and the settlement in the case of CCE, Bangalore-II v. Solectron Centum Electronics Ltd. by the Division Bench of the High Court of Karnataka. The High Court emphasized that Notification No. 22/2003 was similar to Notification No. 1/95. Referring to the Solectron Centum Electronics Ltd. case, the court highlighted the entitlement of the EHTP unit to exemption from duty payment based on specific conditions, leading to the conclusion that the matters required reconsideration by the Tribunal in light of the legal position established in the Solectron Centum Electronics Ltd. case.In conclusion, the High Court allowed the appeals, set aside the impugned order, and remanded the matters to the Tribunal for a fresh consideration based on the legal position outlined in the Solectron Centum Electronics Ltd. case, leaving the substantial questions of law open for further examination.
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