TaxTMI 
TaxTMI 
2014 (12) TMI 905
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....tractors is not subject to the condition that the credit on inputs lying in stock is to be reversed? iii. Whether the second respondent is right in deciding the appeal of the appellants by applying the decision of Two-Member Bench in the case of Albert David Ltd. v. CCE, 2003 (151) ELT 443 (Tri.Del) contrary to the finding of the Supreme Court in the case of Dai-Ichi Karkaria, 1999 (112) ELT 353? iv. Whether the second respondent is right in deciding the appeal of the appellants by not following the decision of the Larger Bench in the case of CCE, Rajkot v. Ashok Iron and Steel Fabricators, 2002 (140) ELT 227 (Tri.LB)? v. Whether the second respondent is right in disagreeing, contrary to the law laid down by the Supreme Court in the case of UOI v. Paras Laminates (P) Ltd., 1990 (49) ELT 322, with the decision of the Co-ordinate Bench in appellants' own case vide Final Order No.1463/2005, dated 24.8.2005 which has held that the decision in the case of M/s. Albert David Ltd. v. CCE, 2003 (151) ELT 443 (Tr.Del.) is per incuriam? 2.1. The facts in a nutshell are as under: The appellant is a manufacturer of agricultural tr....
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....lying on a decision of the Supreme Court in Commissioner of Central Excise v. Dai Ichi Karkaria Ltd., 1999 (112) ELT 353 (SC) and a decision of a Larger Bench of the Delhi Tribunal in Commissioner of Central Excise, Rajkot v. Ashok Iron and Steel Fabricators, 2002 (140) ELT 277 (Tri-LB). 2.5. However, the Commissioner of Central Excise, Madurai, by Order-in-Original dated 4.1.2006, confirmed the demand, apart from levying interest and imposing penalty. 2.6. Aggrieved by the said order, the appellant filed appeal before the Tribunal reiterating the plea that the appellant is not liable to reverse or payback the credit of duties attributable to the inputs lying in stock as such and inputs forming part of finished tractors lying in stock as on 9.7.2004, as the appellant availed cenvat credit validly when there was no exemption from excise duty on tractors. It was also pleaded that there was no fraud, misstatement or irregularity in claiming cenvat credit. The appellant relied upon the decision of the Supreme Court in Dai Ichi Karkaria Ltd. case and the decision of the Larger Bench of the Tribunal in Ashok Iron and Steel Fabricators case, referred supra. That apart, the appellant poi....
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....bunal referring to Rule 57AD of the Central Excise Rules, held that the credit taken on inputs lying in stock on the date from which the final products were exempt from duty was recoverable from the assessee. The said view of the Tribunal in Albert David Ltd. case, referred supra, according to the Tribunal has been upheld by the Supreme Court and, therefore, they chose to rely upon the said decision. 2.7.6. Thus, the Tribunal, in the present case, thought it fit to hold that the Bangalore Bench decision in the appellant's own case is not acceptable and accordingly, upheld the order passed by the Commissioner of Central Excise in respect of demand of duty and a portion of the interest, but set aside the penalty imposed. 2.8. Challenging the said order passed by the Tribunal, the present appeal is filed on the substantial questions of law, referred supra. 3. It was pointed out by Mr.Parthasarathy, learned counsel appearing for the appellant that the Larger Bench decision of the Tribunal in Ashok Iron and Steel Fabricators case, referred supra, decided an issue which is identical to the facts of the present case. The Tribunal in Ashok Iron and Steel Fabricators case, referred s....
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.... is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. 18. It is, therefore, that in the case of Eicher Motors Ltd. v. Union of India, 1999 (106) ELT 3, this Court said that a credit under the MODVAT Scheme was 'as good as tax paid'.' 7. There is no provision in the modvat rules which provides for a reversal of the credit by the Excise authorities where it has been illegally and irregularly taken, in which event it stands cancelled or if utilised, has to be paid for. 8. The Punjab and Haryana High Court in the case of Commission of Central Ecise, Panchkula v. HMT Ltd., Ponjore, reported in 2010-TIOL-316-HC-P&H-CX at paragraph 17 have held as under: 'Similarly, the Principal/Larger bench of the Tribunal after considering the various judgments mentioned in case H.M.T. v. Commissioner of Central Excise's case (supra) (between the....
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....39;s own case. The decision of the Larger Bench of the Tribunal in HMT case, referred supra, was tested before the Punjab and Haryana High Court and was upheld in the decision rendered in Commissioner of Central Excise v. HMT (TD) Ltd., 2010-TIOL-316-HC-P&H-CX. 7. It is also the plea of the learned counsel for the appellant that the issue as to whether cenvat credit available after the final product has become exempted and how the cenvat credit should be recovered has been clarified by insertion of Rule 11(3) of the Cenvat Credit Rules, 2004, by notification No.10/2007-CE (NT), dated 1.3.2007. Rule 11(3) of the Cenvat Credit Rules, 2004 reads as under: "Rule 11. Transitional provision.- (1) *** (2) *** (3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if,- (i) he opts for exemption from whole of the duty of excise leviable on ....
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....e date of filing of original return, subject to specified conditions; d) New sub-rules (3) & (4) have been inserted in rule 11 to provide that when a person opts for exemption from whole of duty (in case of conditional notification) or where a product becomes exempted absolutely, in such cases, the CENVAT credit taken on inputs lying in stock, or in process or contained in the final product lying in stock should be reversed. Similar provision has been made in respect of cases wherein taxable service becomes exempted. However, no reversal of credit of input services is required to be made in such cases." 9. Per contra, Mr.Haja Mohideen Gisthi, learned Senior Standing Counsel vehemently argued in favour of the department placing much emphasis on the decision of the Allahabad High Court in Brook Bond Lipton India Ltd. v. CER, 2012 (283) ELT 336 (All.). In that case, the assessee was engaged in the manufacture of packet tea and credit on the inputs was taken on the inputs for use in manufacture of final product till 27.2.1993. However, as tea was exempted from payment of central excise duty with effect from 28.2.1993 under Notification No.2/....
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....of the Allahabad High Court in Super Cassettes Industries Ltd. v. Union of India, 1997 (94) ELT 302 (All.) are extracted hereunder for better clarity: "13. The learned Attorney General cited the judgment of a learned Single Judge of the Allahabad High Court in Super Cassettes Industries Ltd. v. Union of India [1997 (94) ELT 302]. The learned Judge found no warrant for the view that MODVAT credit once availed of by making the necessary entries was irrevocable. He held that there could be no final credit until the inputs were used and excise duty on the final product was paid or the inputs were otherwise disposed of. 14. Before we look at the rules relating to the MODVAT Scheme we must set out the submissions of the learned Attorney General in this regard. He submitted that the raw material suffered excise duty legally and factually. If there had been no MODVAT Scheme excise duty on the raw material would be included in the cost of production of the excisable product. The MODVAT Scheme did not alter this fundamental position. By virtue of it the cost of the raw material was not reduced. The MODVAT Scheme resulted in reducing the excise duty on ....
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.... cannot be utilized in any other manner and, therefore, the view of the Allahabad High Court that is a case of unjust enrichment does not arise. Rule 5 of the Cenvat Credit Rules, 2004 makes the position very clear to the effect that cenvat credit could not be utilized in any other manner except as provided therein. Rule 5 of the Cenvat Credit Rules, 2004 reads as under: "Rule No : 5 Refund of CENVAT Credit.- (1) A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: Refund amount = (Export turnover of goods+ Export turnover of services) WNet CENVAT credit Total turnover Where,-- (A) "Refund amount" means the maximum refund that is admissible; (B) "Net CENVAT credit"....
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.... [rule 6A of the Service Tax Rules, 1994]; (2) "relevant period" means the period for which the claim is filed. Explanation 2.-For the purposes of this rule, the value of services, shall be determined in the same manner as the value for the purposes of sub-rules (3) and (3A) of rule 6 is determined.]" 14. In the instant case, assuming for the moment that the credit is available, it can be used for payment of duty on any other excisable articles and not exempted goods. In such view of the matter, we are not agreeable with the view taken by the Allahabad High Court that it will amount to unjust enrichment. We also notice that the decision in Super Cassettes Industries Ltd case, referred supra, which has been relied upon by the Division Bench in Brook Bond Lipton India Ltd. Case, referred supra, did not find favour with the Supreme Court in Dai Ichi Karkaria Ltd. Case, referred supra. In such view of the matter, it has to be held that the view taken by the Allahabad High Court has not been accepted by the Supreme Court. 15. At this juncture, the Tribunal in Ashok Iron and Steel Fabricators case, referred supra as well as the decision of the Ba....