COMMISSIONER OF CENTRAL EXCISE Vs. SPIC LTD.

JUDGEMENT

(1.) C .M.A. No. 3539 of 2005 is filed at the instance of the Revenue as against the order of the Customs, Excise & Service Tax Appellate Tribunal, Chennai Bench, for the period March, 1998 to June, 1998 and September, 1998 to January, 1999, by raising the following substantial question of law: -

(2.) THE assessee/appellant in C.M.A. No. 3087 of 2009 is an importer and manufacturer of various pharmaceutical drugs such as Penicillin -G, Potassium First Crystals, 6 APA, etc., falling under Chapter 2941.10 of the Central Excise Tariff Act, 1985. As an assessee under the provisions of the Central Excise Act, the appellant availed facility of Modvat credit for inputs and capital goods under Rules 57A and 57Q of the Central Excise Rules. The assessee was granted Duty Entitlement Passbook as per the Export and Import Policy. As per the DEPB Scheme read with Notification No. 34/97, the importers were permitted to clear the input or the capital goods without payment of basic customs duty or additional customs duty in cash, but by utilising the credit earned as an export benefit towards the payment of basic customs duty and additional customs duty. Admittedly, the assessee availed the credit earned for paying the additional customs duty to the tune of Rs. 6,58,477/ - during the period between July, 1998 and September, 1998. According to the Revenue, as per Rule 57Q(2)(i) of the Central Excise Rules, as the manufacturer of the final product had not paid the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 in cash, he could not avail the benefit under Rule 57Q(2)(i). Thus, on the capital goods, as the assessee had availed the benefit under the Duty Entitlement Passbook Scheme by debiting liability under additional duty as against the credit entry in the Passbook, there was violation of Rule 57Q(2)(i) of the Central Excise Rules. In other words, as the assessee had not paid the additional duty leviable under Section 3 of the Customs Tariff Act in cash, Modvat credit was not available to the assessee. Thus proceedings under Rule 57Q of the Central Excise Rules were initiated against the assessee to deny the Modvat credit. The assessee, however, countered the claim of the Revenue that adjustment of the entries on the debit side as regards the duty payable under DEPB scheme is, in effect of payment of duty. Consequently, the question of denying Modvat credit did not arise. The Revenue, however, rejected the claim of the assessee by quoting the policy that unless the additional duty of Customs was paid in cash, the question of availing Modvat credit did not arise. Thus, disallowing the claim of the assessee under Rule 57Q of the Central Excise Rules, 1944, the assessment was completed.

(3.) AS far as the Revenue's appeal in C.M.A. No. 3539 of 2005 is concerned, we find that the Commissioner of Central Excise dismissed the appeal of the assessee, holding that any credit made in the passbook for any amount of duty could not be used for Modvat credit under the Central Excise Law. Thus, on going through the notification relevant to the period under question, the appeal was rejected. Aggrieved by this, assessee went on appeal before the Customs, Excise and Service Tax Appellate Tribunal, which allowed the appeal, following the decision of the Tribunal reported in : 2003 (152) E.L.T. 361 - Polyhose India Private Limited v. CCE, Chennai. Aggrieved by the order of the Tribunal, the Revenue is on appeal, contending that after the Larger Bench decision, the Tribunal's view following the decision reported in : 2003 (152) E.L.T. 361 - Polyhose India Private Limited v. CCE, Chennai, suffers flaw. Hence the present appeal.