CIPLA LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, I find that, in the first appeal, the issue arising for consideration is whether the appellant was required to reverse CENVAT credit taken on capital goods imported by them when the goods were cleared under bond for export under claim of drawback. The appellant had imported capital goods in two consignments and cleared the same on payment of duties of customs including CVD. CENVAT credit of the CVD was taken by them. Subsequently, these capital goods were cleared under bond for export. In the relevant shipping bills, the appellant claimed drawback of the duty to the extent permitted under Section 74 of the Customs Act. In adjudication of the relevant show -cause notice, the original authority took the view that, as the capital goods were cleared for export shortly after the import, they were not intended to be used for manufacture of excisable goods and therefore the appellant was not entitled to avail CENVAT credit on such goods in terms of Rule 3(1) of the Cenvat Credit Rules, 2004. That authority held that, under Rule 3(5) of the said Rules, the assessee was required, at the time of clearing the capital goods as such from their factory, to pay an amount equal to the credit availed. On this basis, demand of duty of Rs. 3,43,348/ - was confirmed against the assessee under Section 11A of the Central Excise Act read with Rule 14 of the Cenvat Credit Rules, 2004. Interest on duty was also demanded under Section 11AB read with Rule 14. Penalty equal to duty was imposed on the assessee under Rule 15 read with Section 11AC. Aggrieved by the order of adjudication, the assessee preferred an appeal to the Commissioner (Appeals) before whom they submitted that, as they had already modified their drawback claim so as to exclude CVD therefrom, the CENVAT credit of CVD taken on the capital goods was not liable to be reversed. The ld. counsel has reiterated the same contention before me today and the ld. SDR has opposed it. I find that the above contention of the assessee was not examined by the ld. Commissioner (Appeals) though it was noted by him. In this scenario, the issue discussed hereinbefore requires to be remanded to the lower appellate authority. Accordingly, the ld. Commissioner (Appeals) is directed to consider and decide on the question whether the assessee is entitled to retain the CENVAT credit of CVD paid on the capital goods covered by Bill of Entry No. 508560 dated 12.1.06 and Bill of Entry No. 516366 dated 20.1.06, while pursuing their drawback claim under Section 74 of the Customs Act to the reduced extent in relation to the capital goods re -exported under Shipping Bills No. 93 and No. 94 dated 10.5.06. Needless to say that the assessee should be given a reasonable opportunity of being heard. The first appeal stands allowed by way of remand.

(2.) THE records of the second appeal indicate that the assessee had indigenously procured both inputs and capital goods on which they took CENVAT credit. The inputs were used in the manufacture of final product. One of these inputs viz. ascorbic acid, on which CENVAT credit was taken on 22.1.03 on the strength of invoice dated 21.1.03 issued by the supplier (M/s. Hindustan Biologicals) was cleared as such from the factory on the same day under cover of invoice dated 22.1.03 whereunder duty of excise was paid at a lower assessable value vis   -vis the credit availed. In the relevant show -cause notice, the department demanded differential duty. The capital goods which were procured by the assessee in the month of Nov. 1997 and on which CENVAT credit was availed on the strength of the supplier's invoice were used in the factory for manufacture of excisable goods over a period of time and ultimately cleared "as such" from the factory in December, 2001 on payment of duty on the transaction value which was lower than the original value. In the relevant show -cause notice, the department sought to recover differential duty on the capital goods on the premise that, under the relevant provision of the Cenvat Credit Rules, the noticee was liable to pay duty equal to the CENVAT credit originally availed. In adjudication of the show -cause notice, the original authority confirmed the demand of duty after rejecting the various contentions raised by the assessee. Thus demand of duty of Rs. 7,16,576/ - came to be raised against the assessee, besides equal amount of penalty. The order of adjudication was sustained by the Commissioner (Appeals). Hence the present appeal.

(3.) AFTER considering the submissions, I find that the question before me is whether the credit -availed capital goods could be said to have been removed "as such" for purposes of Rule 3(5) of the Cenvat Credit Rules, 2004 where such removal was after having used the goods for the manufacture of final products in their factory over a period of time. An apparently similar question was considered in the case of Cummins India Ltd. (supra). The Larger Bench which dealt with the case of Modernova Plastyles Pvt. Ltd. (supra) noted the difference between Rule 3(4) and Rule 4(5) and therefore did not consider the decision in Cummins India Ltd.'s case to be relevant to the issue on hand which did not in value Rule 4(5). It is on record that the Tribunal's decision in Cummins India Ltd's case stands affirmed by the Hon'ble High Court and hence that decision would override the Tribunal's decisions to the contra. It appears from the appellate Commissioner's order that the relevant question pertaining to the capital goods was not examined in the correct perspective. I am, therefore, of the view that this question should also be readdressed by the lower appellate authority. It is ordered accordingly. The ld. Commissioner (Appeals) is directed to consider and decide on the question relating to capital goods in the light of the relevant provisions of the Cenvat Credit Rules, 2004 and the relevant case law after giving the assessee a reasonable opportunity of being heard. The input -related issue stands decided at this stage in favour of the Revenue. The second appeal is accordingly disposed of.