TaxTMI 
TaxTMI 
2026 (7) TMI 1537
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.... 29.08.2006, was issued by the Commissioner of Central Excise, Chennai-II, seeking to treat the process of placing all imported ready to use unexposed colour film rolls packed in plastic canisters in printed cartons with brand name and MRP as a process of manufacture and a demand for Central Excise Duty, on the sale of the subject goods during the period from 01.03.2003 to 31.08.2004, was made. In the impugned show cause notice, the duty was demanded for the entire period along with interest and penalty by invoking the extended period of limitation. The 1st respondent submitted his reply to the show cause notice on 25.10.2006, submitting inter alia that the process undertaken by it, did not amount to manufacture and that the duty demanded could not be sustained since the issue was completely revenue neutral. The 1st respondent further contended that the demand was not sustainable, since the extended period of limitation was not invocable in the facts of the case. The original authority, namely, the Commissioner of Central Excise, Chennai-II, vide order dated 28.11.2006, rejected the 1st respondent's contentions and confirmed the entire amount of duty of Rs. 20,37,33,174/- under Sec....
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.... (i) deciding the appeal without recording a finding on the applicability or otherwise of a Larger Bench decision of CESTAT and a judgment of the Hon'ble Supreme Court relied by the Appellant in the Adjudication Order; (ii) deciding the appeal relying on the Supreme Court judgment rendered in the case of M/s.Narmada Chemataur Pharmaceuticals where the facts are different; (iii) holding that the demand was barred by limitation of time when there was deliberate withholding of information and voluntary entry into Central Excise net from 01.03.2006; (iv) whether penalty is imposable for violation of rules, even if the demand for duty was revenue neutral; and (v) whether the question of Cenvat credit or revenue neutrality would apply when CVD is paid only by debit DEPB scrips. (3) The learned counsel for the appellant/Revenue submitted that the excisability of the subject goods was not an issue, since the categorical finding of the Original Authority, that the activity carried on by the 1st respondent amounted to manufacturing activity in terms of Section 2(f) (iii) of the Central Excise Act, was left undisturbed by the tribunal. The learned c....
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.... Alupro Building Systems Pvt. Ltd. Versus Commissioner of Central Excise, Bangalore - II (2026) 42 Centax 456 (SC) [27-05-2026]; b. Commr. of S.T. Kolkata versus Calcutta Industrial Supply Corporation - 2018 (19) GSTL 444 (Cal.) [04-10-2018]; c. Commissioner of C. Ex., Pondicherry versus CESTAT, Chennai - 2016 (340) ELT 53 (Mad.) [13-06-2016], the appeal before this Court is not maintainable. The learned counsel submitted that even the issue of revenue neutrality which is raised as an alternate plea, is related to the levy of duty on the final product, a sin qua non for availment of CENVAT credit. The learned counsel submitted that since the Revenue gave up its primary issue relating to excisability of the subject goods, the allied issue of revenue neutrality does not survive for consideration in the appeal. The learned counsel further submitted that as per the Foreign Trade Policy of 2004-05, the additional duty of debit in DEPB scrips was eligible for CENVAT credit and same was continued in Foreign Trade Policy in 2005-06. The learned counsel submitted that as per Foreign Trade Policy of 2003-04, the CENVAT credit, by adjustment of DEPB scrips was not permitted for the period pri....
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....ing activities on the ground that it was a hollow statement made without any material. The plea of bona fide belief was also rejected on the ground that the law governing the definition of "manufacture" as contained in Section 2(f)(iii) remained unchanged and further the records revealed that with effect from 01.03.2006, the 1st respondent voluntarily commenced the payment of duty on the subject goods. On the issue of penalty, the Original Authority found that there was gross violation of Rules 4, 6, 8, 10, 11 and 12 of the Central Excise Act, 2002, and that the 1st respondent by its positive acts, had evaded excise duty, contravening the provisions of the Act and Rules and hence, held it liable for deterrent penalty in terms of the proviso to Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002. The 1st respondent filed appeal against the order of the Original Authority raising several grounds, including that none of the requirements of Section 2(f)(iii) were satisfied with regard to the trading activity carried out by it and therefore the activity carried out by it was erroneously construed as "manufacture" and alternately pleaded the issue of revenue neutr....
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....d for CVD paid on imported goods debited to DEPB scrips upto 31.08.2004 and that, even thereafter the quantum of credit available is not precisely known to conclude whether the credit available was sufficient to cover the duty due. The learned counsel therefore submitted that on the facts of the case, the plea of revenue neutrality was unsustainable. (12) Countering the learned counsel for the appellant, the learned counsel for the 1st respondent submitted that the judgment in Mohan Breweries and Distilleries case, was not applicable to the facts of the present case as it pertains to a period prior to EXIM policy. The learned counsel further submitted that the Foreign Trade Policy of 2003-04 specifically deleted the clause pertaining to non-availment of CENVAT credit by adjustment in DEPB scrips prior to 2003 and that the Foreign Trade Policy of 2004- 05, in order to bring clarity, specifically provided that additional duty debited in DEPB scrips is available for availment of CENVAT scrips and the same was continued in the Foreign Trade Policy of 2005-06. The learned counsel further submitted that it was not open to the Revenue to raise an issue with regard to revenue neutrality....
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....neutrality is as follows: "In the present case, it is not in dispute that, during 2004- 05 and afterwards, the appellants were entitled to avail CENVAT credit of CVD paid through DEPB on the imported raw material. Similar credit of duty of excise paid on indigenous raw material also was, of course, available to them. For the prior period, the demand is evidently hit by time-bar for the reasons stated by learned counsel." The Tribunal has failed to note that for the period upto 31.08.2004, the judgment of this Court in Mohan Breweries and Distilleries Limited case, squarely applies. (17) The issue before the Division Bench of this Court in the Mohan Breweries' case was whether CENVAT credit could be availed, if the same was paid upon debit entry in passbook entry in DEPB scheme and without paying it in cash. (18) The Division Bench after referring to EXIM Policy as also the notifications connected therewith, held as follows: "14.But as pointed out by the learned Standing Counsel for the Revenue, DEPB Scheme was actually introduced in the EXIM Policy, to neutralize the incidence of customs duty on import content of export products. The credit itself is avai....
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....e that under the Scheme available from 1.4.2000, there is a specific prohibition that wherever the additional customs duty is adjusted from DEPB, the assessee would not be entitled to Cenvat/Drawback. However, in the absence of any such specific prohibition for the period prior to 2000, considering the provision under Paragraph 7.25 that a holder of DEPB shall have the option to pay additional customs duty if any, in cash, the provision under Paragraph 7.41 could only be read as recognizing payment in cash too available for adjustment under Modvat Scheme. Thus, in the absence of any restrictive wording, we do no find any justification to deny the benefit of Modvat credit available to a case covered by the credit taken under the Passbook Scheme.'' 21.Therefore, after a specific prohibition was introduced under the Scheme from 1.4.200 onwards, it is not possible for the appellant to claim the benefit in respect of the Bill of Entry of the year 2003. Therefore, the decision in Spic, even if it is taken to water down the decision of the Larger Bench in ESSAR Steel Limited, does so only in respect of the period prior to 2000. Therefore, the decision of this Court in Spic is not....
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.... is untenable and liable to be set aside. Limitation: (22) In so far as applicability of the extended period of limitation is concerned, we find that the Appellate Authority has dealt with the same in a very Cavalier fashion. The Tribunal on the issue of limitation held as follows: "For the prior period, the demand is evidently hit by time-bar for the reasons stated by learned counsel." (23) The said finding is patently unreasonable. On consideration of the entire materials and after elaborate discussion of each of the aspects of Section 11A, the Original Authority, held as follows: "When the whole case is considered dispassionately, it is well evident that CGL had made serious attempts to make mockery of settled laws and concealed their activities from the knowledge of the Department in pursuit of profit motive at the cost of Government Revenue. In these circumstances, the principles set out by the Hon'ble Supreme Court to demand duty under extended proviso to Section 11A[1] being fully present, invocation of the same in this case is well justified." (24) In the absence of any justifiable reasons to overturn the said finding of the Original Authority ....