2019 (7) TMI 1127 - HC - Central Excise

CESTAT Decision: MODVAT Credit Disallowed for Exempted Final Products, Remitted for Reconsideration

M/s. Ambika Cotton Mills Limited Versus The Commissioner of Central Excise (Appeals), The Customs, Excise And Service Tax Appellate Tribunal

The CESTAT disallowed MODVAT Credit to the Assessee for capital goods used in manufacturing exempted final products for a 100% EOU, citing relevant ... 100% EOU - MODVAT/CENVAT Credit - purchase of capital goods - credit denied on the ground that since it was 100% EOU, Rule 57R or 57T or 57Q of CESTAT Rules does not allow any such MODVAT Credit in respect of duty paid by the Appellant on purchase of capital goods - HELD THAT:- The learned Tribunal failed to address itself to the main contention raised by the Appellant/Assessee before the learned Tribunal as well as this court that Chapter V-A of the Central Excise Rules 1944 itself did not apply the case of the Appellant/Assssee as the clearance of the excisable goods was made by the Appellant/Assessee not for Home Consumption but, for export wheres Chapter V-A apply only if the clearance of excisable goods is made for Home Consumption. The learned counsel for the Appellant/Assessee contended that the Appellant/Assessee has a got a separate manufacturing unit from which the goods are cleared for Home Consumption or for sale within India, whereas from the 100% EOU in question, no such clearance is made for Home Consumption and therefore, Rule 57Q does not stand in the way as per Rule 100H under Chapter V-A of the Act Central Excise Rules, 1944. Matter remitted back to the learned CESTAT for fresh consideration of this aspect - appeal allowed by way of remand. Issues:1. Disallowance of MODVAT Credit to the Appellant/Assessee by the CESTAT.2. Interpretation of Rule 57R, 57T, and 57Q of Central Excise Rules regarding eligibility for MODVAT credit.3. Applicability of Chapter V-A of Central Excise Rules to a 100% Export-Oriented Undertaking (EOU) for clearance of excisable goods.4. Consideration of MODVAT Credit against duty paid on capital goods for export purposes.5. Failure of the Tribunal to address the main contention of the Appellant/Assessee.Analysis:1. The Assessee appealed against the CESTAT's order disallowing MODVAT Credit, citing Rule 57R, 57T, and 57Q of the Central Excise Rules. The Tribunal held that no MODVAT credit was allowed for capital goods exclusively used in manufacturing exempted final products for a 100% EOU. The denial of credit was justified based on relevant rules and notifications.2. The Appellant argued that Chapter V-A of the Central Excise Rules did not apply as the final goods were cleared for export, not for home consumption. The Appellant contended that MODVAT Credit should be allowed under Rule 57Q for duty paid on capital goods. The Tribunal failed to address this crucial aspect, leading to the decision to remit the matter back for further consideration.3. The Appellant highlighted the distinction between clearance for home consumption and export, emphasizing that Rule 100H under Chapter V-A exempted certain provisions for excisable goods produced by a 100% EOU. The Appellant's separate manufacturing unit for goods intended for home consumption further supported the argument for MODVAT Credit eligibility.4. The Tribunal's oversight in addressing the Appellant's primary contention necessitated the decision to set aside the order and refer the matter back for reevaluation. The Appellant's position on the applicability of Rule 57Q and Chapter V-A to their export-oriented activities required proper consideration by the CESTAT, with a directive to issue a fresh decision within six months.This detailed analysis of the judgment outlines the key issues, arguments presented, and the court's decision to remit the matter for further review, ensuring a comprehensive understanding of the legal complexities involved.