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2010 (8) TMI 233

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....re wholly exempt from NCCD, if manufactured out of goods falling under CETH 54.02. Accordingly, the appellant was availing the benefit of exemption from June, 2003 onwards in respect of PTY manufactured out of POY, both falling under CETH 54.02. However, the PTY falling under CETH 5402 was liable to the basic excise duty. 4. The appellant availed exemption in respect of NCCD for yarn manufactured and captively consumed under Notification No. 67/95-C.E. The appellant also availed exemption in respect of NCCD on yarn cleared to 100% EOUs under Notification No. 1/95-C.E. 5.A case was made out against the appellant, vide show cause notice No. DGCEI/AZU/36-44/04 dated 2-10-04, whereby NCCD not paid by the appellant under the above two notifications was demanded. A total amount of NCCD of Rs. 1,35,69,465/- + Rs. 8,01,326/- was proposed, against which, an amount of Rs. 72,79,517/- + Rs. 8,01,326/- was confirmed vide OIO No. 50/VDR-II/MP/2004 dated 3-3-05. The demand covered vide the said proceedings pertained to the period March 03 to June 04. 6. The appellant submitted that they had paid the NCCD amounting to Rs. 1,18,21,343/- on captively consumed POY in the manufacture o....

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....t scheme permits immediate cenvat credit availment in as much as the manufacturer is not obliged to wait until the supplier actually deposits the duty with the government. Movement of goods for captive consumption is treated as "removal" for the purpose of levying and collecting duty of excise. Hence, what applies to physical removal of goods applies to goods moved for captive consumption, including the availment of cenvat credit. 11.3 Similarly, by way of an analogy, in cases where goods are cleared under invoice on duty payment and are returned in the same month, the manufacturer, while availing cenvat credit under Rule 16 of Central Excise Rules, 2002 on basis of its own invoices, is allowed to use the very same cenvat credit to discharge duty liability, which will also include duty liability on account of the very same clearances of which cenvat credit is availed under Rule 16. The present issue on hand is no different. 11.4 As regards issue No. 2, for the identical issue for the subsequent period of December 05 to February 08, the Commissioner, Central Excise, Vadodara-II himself dropped the proceedings vide OIO No. 9-12/VDR-II/Modern Petro/MKR/COMMR/08-09 dated ....

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....es of POY for captive consumption for use in the manufacture of PT4 or on the clearances of POY free of duty to 100% EOUs by availing the benefit of Notification No. 1/95-C.E. dated 1-4-95. Since, the captive consumption Notification No. 67/95-C.E. dated 16-3-95 applicable for the goods cleared for captive consumption for use in the manufacture of other excisable goods and Notification No. 1/95-C.E. applicable for the excisable goods cleared to 100% EOUs did not exempt the NCCD, the DGCEI booked a case of evasion of NCCD against the assessee in respect of clearances of POY to 100% EOUs. Accordingly a show cause Notice No. DGCEI/AZU/36-44/04 dated 2-10-04 was issued to the assessee for recovery of NCCD amounting to Rs. 1,06,13,534/- in respect of clearances of POY for captive consumption during the period from March, 2003 to June, 2004 and NCCD amounting to Rs. 29,55,931/- in respect of clearances of POY without payment of duty to 100% EOUs during the same period. This show cause notice also sought, in addition to recovery of NCCD, interest on it at the applicable rate and imposition of penalty on the assessee for non payment of NCCD. However, even prior to issue of the show cause n....

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....ssee had taken this NCCD credit in a fraudulent manner and since the same had been utilized by the assessee for payment of NCCD on captive clearances of POY for the period from March, 03 to July, 04, the same appeared to be recoverable from the assessee alongwith interest at the applicable rate on it as per the provisions of Rule 12 of Cenvat Credit Rules, 2002/Rule 14 of Cenvat Credit Rules, 2004 read with proviso to Section 11A(1) of the Central Excise Act, 1944. 15.The order passed by this Tribunal dated 3-12-09 does not help the appellants in any manner. It has to be noted that with effect from 17-5-03, the situation changed. If they were to claim exemption on POY under Notification No. 67/95-C.E., appellants would have been required to pay NCCD on the PTY manufactured out of such POY. Therefore appellants claimed to have paid duty on POY on 31-8-04 without debiting either PLA or cenvat credit account and based on such supplementary invoices took credit of the duty paid on POY and thereafter continued to issue invoices by debiting cenvat credit and take the same amount as credit on POY thereby treating POY as an input and output simultaneously. The initial credit taken by them....

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.... credit shall be upon the manufacturer taking the credit. In this case what is being demanded is the credit taken and not the duty paid on the POY. As discussed above the credit taken was wrong and therefore the order of this Tribunal holding that duty could not have been paid on the POY also will be of no help to the appellants. Once it is held that cenvat credit taken is wrong, and the same has been taken on the basis of the documents knowing fully well that no duty has been paid, suppression of fact, mis-declaration and fraud is involved. Therefore the cenvat credit can rightly be demanded under Rule 14 of Cenvat Credit Rules, 2004 with interest. Similarly appellants are liable to penalty under Erstwhile Rule 13 of Cenvat Credit Rules, 2002 and Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 with regard to the amount of Rs. 1,18,21,343/-. 16.Coming to the second issue which is demand for an amount of Rs. 1,28,04,499/-. This amount has been demanded on the ground that the finished goods namely PTY is exempt and therefore cenvat credit could not have been taken on POY or they should have maintained separate accounts. In this case the finish....