TaxTMI 
TaxTMI 
2006 (1) TMI 493
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 23rd September, 2002 and 22nd October, 2003. Accordingly, the goods were destroyed on 12th June, 2003 and 16th April, 2005 respectively. The medicines so destroyed were valued at Rs. 1,81,55,048/- on which the duty was worked out to be Rs. 29,04,807/- and that very amount was ordered to be remitted by the Commissioner, Central Excise, Ahmedabad-II. However, on such drugs/medicines, so destroyed the input credit availed in total was for an amount of Rs. 23,70,893/- which was availed and utilised by M/s. Intas Pharmaceuticals Ltd. while manufacturing such other medicines which ultimately became the bone of contentions in as much as the Commissioner vide his show cause notice issued under F. No. V.30/15-165/Dem/05 dated 14th October, 2005 called on M/s. Intas Pharmaceuticals Ltd. to show cause within 30 days as to why the amount of Cenvat credit to the tune of Rs. 23,70,893/- should not be demanded and be recovered from them along with interst under provisions of Rule 12 of the Cenvat Credit Rules, 2002 read with Rule 14 of Cenvat Credit Rules, 2004 and further read with Section 11A(1) of the Central Excise Act, 1944. The interest was further demanded under provisions of Section 11A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dit Rules, 2002 as well as the provisions of Rule 6 of the said rules, they had submitted that the reliance placed by the Commissioner in M/s. Mafatlal Industries Ltd. case is not in favour of revenue rather is against the revenue; that in para-5 of M/s. Mafatlal Industries Ltd. case the Hon'ble Tribunal had observed that the decision of the northern Bench of the Hon'ble Tribunal in case of M/s. Inalsa Ltd. v. CCE, New Delhi that the remission of duty on the finished goods cannot be equated with exemption to goods and that the inputs can be considered to have been put to the intended use of manufacturing of the final products. Since in their case, the final product is not exempt from payment of duty, the credit of duty should not be denied; that this point had not been put before the Hon'ble Tribunal in case of M/s. Mafatlal Industries Ltd. (ii) In terms of Sub-rule 2, it requires reversal of credit @ 10% of the sale price of the exempted goods when no separate accounts of inputs used in the manufacture of exempted goods have been maintained. In other words, they are referring to ratio of earlier rule what was known as popularly Rule 57CC. In other words, their....
X X X X Extracts X X X X
X X X X Extracts X X X X
....required to be reversed. Therefore, the department should not raise an issue for the reversal of the Cenvat credit in such cases. (vi) While granting the remission permission, no condition has been incorporated in the letter granting the remission permission for the reversal of Cenvat credit. Therefore, the department cannot demand the Cenvat credit so utilised, which may correspond to the finished products which were destroyed after more than a period of such destruction; that the notice ought to have been issued within one year from the date of granting such permission; that no specific grounds has been mentioned in the show cause notice to extend the larger period. (vii) That the inputs have been got processed and had been put in use thus, had lost its original shape, size, color etc. and actually stands consumed during the process for purpose of manufacture of final products and therefore, basic purpose of allowing Cenvat credit is fully justified and satisfied. Therefore, the question of reversal of Cenvat credit does not arise at all; that both the applications for destruction were submitted after issuance of CBEC circular dated 7-8-2002 which mandates....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n made by the audit party in both cases of remission; that CERA party also conducted the audit from December, 2002 to March, 2004 (excluding the period between January, 2002 to March, 2003), by them also it could not be pointed out that Cenvat credit was not admissible to them on that quantity of medicines as ordered to be destroyed. (xi) Reliance was also placed on CESTAT's decision as rendered in Kirloskar Electric Company v. Commissioner, Banglore as reported in 2002 (141) E.L.T. 224 (Tri. Bang). And that view of such judgments, the loss of final goods due to act of God or failure of human conduct has to be treated as one and the same i.e. on same footing. (xii) That when the demand itself does not survive, question of interest and penalty is also ruled out. (xiii) In view of the foregoing submissions, arguments and case laws, it was concluded that the notice deserves to be dropped and no liability can be fastened on M/s. Intas. Discussions and Findings : 4. After going through the case records carefully and on perusal of submissions advanced by the noticee company, it can be seen that the proposed cause of action are being resisted on merit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Hon'ble Tribunal Delhi Bench decision dated 26-4-05 as reported in 2005-TIOL-834-CST-DEL has held that the Supreme Court decision in CCE, Chennai v. Indchem Electronics has a binding on department, therefore their Honour allowed the credit even on the goods which has been destroyed or were not available for home consumption. Since the Kirloskar case as reported in 2002 (141) E.L.T. 224 was followed in other cases, the law remained as if even after ordering for remission of duty, the input credit would be admissible. In fact, the CBEC Circular No. 650/41/2002-CX., dated 7-8-2002 duly clarified that once the inputs have been used, even if the duty is remitted on final products Cenvat credit/input credit cannot be denied. However, the Hon'ble Tribunal in its order dated 12-3-2003 as reported in the case of Mafatlal Industries v. CCE, Ahmedabad as reported in 2003 (154) E.L.T. 543 held that once duty is not paid on final products for whatsoever reason, the corresponding input credit cannot be allowed and the manufacturer or tax payer cannot be allowed to be unjustly enriched. Taking the leaf out of the said decision, the CBEC issued another Circular No. 800/33/2004-CX, dated 1-1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n corresponding inputs which entered in the final product on the simple reason and logic that the remission of duty for purposes of Cenvat rules and laws have to be equated with clearance at nil rate of duty or as if exempted from duty. The Tribunal upheld the order partly but in view of judgments of other Benches of the Tribunal as referred supra, i.e in the case of Inalsa Limited and Kirloskar, the input credit was allowed which corresponded to inputs which were contained in final products. 7. On merits of the present proceedings it could be stated that Mafatlal Industries judgement has very clearly pronounced the law which has been subsequently followed by some of the Benches as reported in case of Tambraparani Coatings v. CCE, Pondicherry as reported in 2006 (193) E.L.T. 80 (Tri-Chennai). The Hon'ble Tribunal Mumbai Bench in case of Mafatlal Industries has held that : "The appellants has already been compensated by the insurers for the value of the finished goods which is inclusive of the value of the inputs. The intention of the Modvat scheme is that the duty paid on inputs can be taken credit for paying duty on the finished goods to give relief against the cascadin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nst the very spirit of enacted and codified law on the subject. After all, the remission of duty is also allowed by competent authorities under provisions of law only and is not ordered on the whims and fancies of departmental authorities and therefore, has to be equated with exemption or nil rate of duty in Cenvat scheme to give a harmonious, purposeful meaning to such a scheme. On such findings, relying on CBEC Circular dated 7-8-2002 on part of M/s. Intas is clearly devoid of merit. M/s. Intas has claimed that they are well versed in Central Excise Law and Procedures; that they are keeping themselves abreast with the latest development of the Central Excise Law and Procedures; then as such it is not comprehensible as they were not aware of the Tribunal's decision in Mafatlal Industries case as reported in March, 2003 as well as about Golden Polymers case of Calcutta Bench, as referred earlier. The CBEC Circular, was not issued under the provisions of section 37B of the Central Excise Act therefore had to be considered on its face value. No doubt, as interpreted by highest courts of law, it could be binding on the departmental authorities. But there are contrary decisions too. On....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion for remission or processing the application for remission of duty the question of Cenvat credit on inputs which entered in final products was addressed by the Commissioner or by the applicant, i.e. M/s. Intas. Today, taking the shelter of CBEC Circular which stands superceded is like asking for moon by such enlightened assessee like M/s. Intas. 9. It may however be noted that granting remission is a provision of as if gate crashing, i.e. allowing non-payment of duty on goods in certain circumstances. Such orders are not reviewed and are not subjected to review and therefore, raising the issue that had attained such permission the finality and hence cannot be revoked or equating the same with the approval of price list and classification list and relying on judgment of the Supreme Court in the case of Flock India Ltd. is highly misplaced on the part of M/s. Intas. On fairness and equity and even" under clear rules which is also borne out from the case records, that the issue of reversal of Modvat credit or calling it back never arose in between remission and destruction of goods. M/s. Intas being aware of Tribunal's decision of Mafatlal Industries case, destroyed the goo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns representing the parties before their honour. To err is human and to forgive is divine. The fallibility could be anywhere or everywhere but for good faith and within jurisdiction, no liability could be fastened on such persons who are wrong or mis-appreciate the law or the legal position. That has been the reason that the Hon'ble Supreme Court in the case of Z.B. Nagarkar v. UOI as reported in 1999 (112) E.L.T. 772 (S.C.) had held that every error of law cannot constitute or invite a charge of misconduct as that may impinge on the independent functioning of quasi judicial authorities. Therefore, the error of judgment or mis-appreciation of correct legal position could be at any stage. Therefore, it could be corrected subsequently by all concerned authorities/bodies and by the Hon'ble Tribunals/courts, etc. 10. Therefore, in all fairness, equity and good consciousness one should not be allowed to derive undue benefit, which is not flowing out of the provisions of law. The Cenvat credit was reversible to the tune of Rs. 23.70 lakhs on the day when the goods were not found fit for human consumption. When the batches of such medicines were rejected, obviously the Cenvat cred....