Tribunal overturns order, allows appeals on duty payment option & Cenvat credit under Notification No. 65/95-CE.

The Tribunal set aside the impugned order and allowed the appeals, concluding that the appellant had the option to pay duty and avail Cenvat credit under the conditional Notification No. 65/95-CE. The Tribunal found the appropriation of amounts under Section 11D to be incorrect and rejected the demand for the extended period.

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Issues Involved:
1. Applicability of Notification No. 65/95-CE.
2. Validity of Cenvat credit availed.
3. Appropriation under Section 11D of the Act.
4. Invocation of the extended period for demand under the proviso to Section 11A(1) of the Act.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 65/95-CE:
The core issue was whether Notification No. 65/95-CE, which grants exemption from excise duty, is an "absolute" exemption under Section 5A(1) of the Central Excise Act, 1944. The Tribunal analyzed Section 5A(1) and (1A) and concluded that Notification No. 65/95-CE is not unconditional. It imposes four specific conditions: the goods must be manufactured in a workshop within the factory, used within the factory, and used for repairs or maintenance of machinery installed in the factory. Since the exemption is conditional, Section 5A(1A) does not apply, and the appellant had the option to either avail or not avail the exemption.

2. Validity of Cenvat Credit Availed:
The appellant's contention was that even if no excise duty was payable on the final product, they had cleared the goods upon payment of appropriate central excise duty, effectively reversing the Cenvat credit availed. The Tribunal agreed, citing various judicial precedents, including CCE Vs Federal Mogul TPR India Ltd., Incopac Parts Pvt. Ltd. Vs CCE, and Balkrishna Paper Mills Ltd. Vs. CCE. These cases established that in the context of a conditional exemption, the assessee has the discretion to pay duty and avail Cenvat credit. Therefore, the finding that the appellant contravened Rule 6(1) of the Cenvat Credit Rules was incorrect and unsustainable.

3. Appropriation under Section 11D of the Act:
Section 11D(1) and (1A) stipulate that any person who collects an amount representing duty in excess of the duty assessed or determined must pay it to the credit of the Central Government. The Tribunal found no evidence in the show cause notice or the impugned order to establish that the appellant collected any amount in excess of the duty assessed or determined. Since the appellant chose not to avail the exemption under Notification No. 65/95-CE, it could not be said that they collected any amount as representing duty on goods wholly exempt from duty. Consequently, the appropriation of Rs. 24,66,98,505/- and Rs. 2,66,46,006/- was erroneous and unsustainable.

4. Invocation of the Extended Period for Demand:
The appellant argued that the demand for the period July 2006 to June 2010 was barred by limitation and that there was no justification for invoking the extended period under the proviso to Section 11A(1) of the Act. The Tribunal did not specifically address this issue in detail, but the overall setting aside of the impugned order implies that the extended period invocation was not justified.

Conclusion:
The Tribunal set aside the impugned order dated August 30, 2012, passed by the Commissioner of Central Excise & Service Tax, Jamshedpur, and allowed the appeals with consequential relief. The Tribunal concluded that the appellant had the option to pay duty and avail Cenvat credit under the conditional Notification No. 65/95-CE, and the appropriation of amounts under Section 11D was incorrect. The demand for the extended period was also implicitly rejected.

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