Tribunal Upholds Revenue Decision: Appellants Must Pay Duty on Inputs Despite CT-3 Certificate, No Penalty Imposed.

The Tribunal ruled in favor of the Revenue, determining that the appellants were not entitled to clear inputs without duty against a CT-3 Certificate. The appellants were held liable to pay duty equivalent to the Modvat credit initially availed. The Tribunal found the Larger Bench decision in Asia Brown Boveri Ltd. inapplicable post-amendment, requiring duty payment per the Cenvat Credit Rules. No penalty was imposed, but the demand for duty was upheld.

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Issues involved: Whether M/s. Lakshmi Machine Works are eligible to clear inputs without payment of duty against a CT3 Certificate issued by a 100% Export Oriented Unit and whether duty payable is required to be equivalent to Modvat credit initially availed of.

Details of the Judgment:

Issue 1: Eligibility to clear inputs without payment of duty
The appellant contended that as per Rule 57AB of the Central Excise Rules, 1944, when inputs are removed as such, the assessee shall be deemed manufacturer and eligible to remove the same without duty against a CT-3 Certificate. Referring to a Board's Circular, the appellant argued that the Modvat credit can be utilized for export of inputs without reversal of credit. However, the respondent argued that Rule 57AB enables the collection of duty on inputs cleared as such to a 100% EOU. The Tribunal held that since the 100% EOUs did not procure goods directly from the factory of manufacture, the benefit of the Notification was not available, and the appellant was liable to pay duty.

Issue 2: Duty payable equivalent to Modvat credit
The Tribunal referenced the decision in Asia Brown Boveri Ltd., stating that duty payable should not be less than the credit allowed on inputs. However, post-amendment of Rule 57AB and introduction of Cenvat Credit Rules, 2001, the provisions changed. The Tribunal emphasized that duty must be paid based on the rate applicable on the date of removal and value determined under the Act. The appellant's argument that no new rate or value can be determined as they are not the manufacturer was dismissed. The Tribunal held that the duty must be paid as per the provisions of the Cenvat Credit Rules. No penalty was imposed on the appellants, and the demand for duty was upheld.

In conclusion, the Tribunal ruled in favor of the Revenue, holding that the appellants were not eligible to clear inputs without duty against CT-3 Certificate and were liable to pay duty equivalent to the Modvat credit initially availed of. The decision of the Larger Bench in Asia Brown Boveri Ltd. was deemed inapplicable post-amendment, and duty had to be paid as per the Cenvat Credit Rules.

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