2009 (7) TMI 631 - HC - Central Excise

Court affirms manufacturers entitled to benefits as they paid ad valorem duty pre-1-5-2001

The Court upheld the Tribunal's decision that the compounded levy scheme did not apply to the Respondents as they paid ad valorem duty before 1-5-2001. ... Cenvat Credit- Notification No. 7/2001-C.E. dated 1.3.2001 amended by Notification No. 17/2001-C.E. dated 30.4.2001- Deemed credit not admissible for manufactures availing compounded levy scheme as per amendment above. Goods manufactured before 1.5.2001 but cleared on or after such date not covered under compounded levy scheme as per Rule 96ZNB of erstwhile Central Excise Rule, 1944. Duty paid on ad valorem basis as per Show Cause Notice. Manufacturer in the present case not availed compounded levy scheme as per finding of Tribunal. Respondent being manufacturer of goods, deemed credit availed sustainable. Issues: Interpretation of Notification dated 1st March, 2001 and subsequent amendments regarding availing of deemed credit, applicability of compounded levy scheme, and entitlement of benefits to manufacturers of goods.Analysis:1. The appeal questioned the correctness of the CESTAT's decision to set aside an Order-in-Appeal dated 21-9-2004 due to the absence of a provision for deemed credit post-1-5-2001 under a specific notification. The Tribunal ruled that the compounded levy scheme did not apply to the Respondents as they had cleared goods by paying ad valorem duty before 1-5-2001.2. A Notification issued on 1st March, 2001 allowed manufacturers to avail of deemed credit, followed by another Notification on 30th April, 2001, which stated that goods produced before 1st May, 2001 and cleared thereafter were not eligible for certain provisions. The subsequent amendment on 30th April, 2001 inserted Para 4A, stating that manufacturers availing of a special procedure under Rule 96ZNA and paying specified duty under Rule 96ZNC were not entitled to benefits under the 1st March Notification.3. The Tribunal found that the Respondents had paid ad valorem duty instead of availing benefits under the 1st March Notification, as confirmed in the show cause notice and Tribunal's order. The Court held that the Notification applied to manufacturers of goods, and since the Respondents were manufacturers covered by the Notification, the Tribunal's decision was correct, leading to the dismissal of the appeal in favor of the assessee.4. The Court affirmed that the Tribunal had correctly analyzed the issue, rejecting the appellant's argument distinguishing between manufacture and goods. The judgment clarified that the Notification pertained to manufacturers of goods, and as the Respondents fell under this category, there was no legal error in the Tribunal's decision. Consequently, the question posed in the appeal was resolved in favor of the assessee, resulting in the disposal of the appeal in accordance with the decision.