LAKSMI MACHINE WORKS Vs. CCE

JUDGEMENT

(1.) IN these five appeals - 3 filed by M/s. Lakshmi Machine Works and 2 filed by Revenue - common issues involved are whether M/s. Lakshmi Machine Works are eligible to clear the inputs, in respect of which Modvat credit has been availed of, without payment of duty against a CT3 Certificate issued by a 100% Export Oriented Unit and whether the duty, if payable, is required to be equivalent to the amount of Modvat credit initially availed of.

(2.) WE heard Shri S. Jayakumar, ld. Advocate for the assessee and Smt. R.Bhaghya Devi, ld. SDR for the Revenue. Ld. Advocate submitted that the assessee manufactured textile machinery and parts thereof; that they also availed Modvat credit of the duty paid on parts purchased from the market; that they are supplying these machineries to 100% EOU; that whenever these 100% EOU needs any spare parts the same is also supplied by them against CT3 Certificate out of the inputs purchased by them from the market. Ld. Advocate, further, submitted that as per Explanation to Rule 57AB of the Central Excise Rules, 1944 when inputs are removed as such, the assessee shall be the deemed manufacturer and once the removal of inputs as such is considered as deemed manufacture, they are eligible to remove the same without payment of duty against CT3 Certificate issued by the 100% dated 4.1.1995. In support of his contention he referred to the Board's Circular No. -CX dated 31.12.1996 where it has been clarified that the Modvat credit in RG23A Part - II account against the export of inputs as such under bond can be utilised in the same manner as it is provided for a final product under proviso to Rule 57F (4). Obviously it follows from this that such inputs should be allowed to be exported under bond without any reversal of the credit. Ld. Advocate contended that the inputs are removed by them to the 100% EOUs also under bond and as such the clarification contained in Circular dated 31.12.1996 is applicable to such clearances also. Finally ld. Advocate submitted that even if it is held by the Tribunal that the assessee was not eligible to remove the inputs without payment of duty to the 100% EOUs, they are liable to pay duty equivalent to the amount of Modvat credit availed by them; that as they are not manufacturer of the inputs, they cannot be asked to discharge the duty liability on the price at which the goods are sold by them. In support of his contention he relied upon the decision of the Larger Bench of the Tribunal in the case of CCE, Vadodara v. Asia Brown Boveri Ltd. - : 2000 (120) ELT 228 (Tri. - LB) and contended that the said decision has laid down the policy that on clearance of the inputs duty more than the credit availed of cannot be asked to be paid by an assessee. Reliance has also been placed on the decision in the case of Eicher Tractors/Eicher Motors Ltd. v. CCE, Jaipur/Indore -[2004 - TIOL - 478 - CESTAT -DEL] wherein the Tribunal even under CENVAT Credit Rules 2001 has held that "What an assessee is required to do when he removes inputs as such can only be to restore the credit, that he had taken". He, therefore, contended that whether under Rule 57AB of the Central Excise Rules, 1944 or under Rule 3(4) of CENVAT Credit Rules, 2001, the assessee is only required to reverse the amount of credit taken by him, at the time of clearance of inputs as such. He also submitted that no penalty is imposable on the assessee was different views have been held at different times and the Commissioner (Appeals) has allowed their appeal holding that when the inputs are cleared as such the assessee has to be treated as manufacturer of the inputs and therefore they are eligible to remove the inputs against CT3 Certificate.

(3.) WE have considered the submissions of both the sides. The assessee is getting the inputs for manufacture of machineries, their final product, and avail of CENVAT Credit of the duty paid on such inputs. They are not the manufacturer of the inputs at all. The Notification No. -CE dated 4.1.1995 contains the conditions on fulfilment of which the 100% EOU can procure the goods without payment of duty. One of such condition is that the 100% EOU brings the excisable goods directly from the factory of manufacture. As in the present matters the 100% EOUs have not purchased the excisable goods directly from the factory of manufacture and only from the assessee who has obtained them from the factory of manufacture and has availed of Modvat credit, the condition specified in the Notification has not been complied with and accordingly the benefit of Notification No. 1/95 - CE is not available to the impugned goods cleared by the assessee. Accordingly they are liable to pay the duty. This was also the decision of the Tribunal in the case of Siddhartha Tubes Ltd. v. CCE, Indore - 2002 (148) ELT 96 (T).