AUROBINDO PHARMA LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS appeal arises from Order -in -Original No. 03/2007 -CE dated 30.03.2007 by which the Commissioner has confirmed the allegations made in the Show Cause Notice and has disallowed the Cenvat Credit of Rs. 57,13,496/ - and the allegation with the Cenvat Credit availed wrongly and its recovery has to be done in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944. The appellants have been imposed penalty of Rs. 20,00,000/ -. There is confirmation of interest also. The short facts are that the assesses are the manufacturers of Bulk Drugs and Drug Intermediates falling under Chapter Heading No. 29 of the Central Excise Tariff Act, 1985 and are availing Cenvat Credit on the inputs used in the manufacture of both dutiable and exempted goods. They cleared the dutiable goods on payment of duty at 16% and the exempted goods by paying an amount equal to 10% of the price of the exempted goods as required under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. The Revenue proceeded against the assessee and the allegation is that as per Rule 4(1) of the said Rules, a manufacturer is required to avail Cenvat Credit on the inputs used in the manufacture of dutiable goods immediately after the receipt of the inputs into the factory whereas in the facts of the case, the assessees have not taken credit immediately on receipt of the inputs in the factory but took credit after the dutiable goods were cleared. Hence, it was alleged that under various rules of the Cenvat Credit Rules they availed the Cenvat Credit wrongly to the extent of duty confirmed in the matter.

(2.) THE learned Counsel submits that in any case this issue was decided by this Bench vide their Final Order No. 1144/2007 dated 28.09.2007 and submitted that the issue is covered in their favour. He produced copy of this order and prays for allowing the appeal. The learned Departmental Representative reiterates the departmental view.

(3.) WE heard both sides. The short point involved is the irregular availment of cenvat credit in the facts and circumstances of this case. The appellants are manufacturers of various drugs. In this case they obtained certain inputs for their final product EFFAVIRENZ, which is exempted. Since the final product is exempted, they did not avail any cenvat credit on the said inputs. While manufacturing this final product, it was stressed that there are several stages and in stage - VI a particular intermediate product arises. It so happened that the appellants decided to clear a part of the intermediate product on payment of duty. Since they had cleared the intermediate product which arose at stage - VI on payment of duty they calculated the duty attributable to the inputs which have gone into the production of the said intermediate product. The appellants at a latest had taken this duty as cenvat credit. Revenue has seriously objected to taking of this cenvat credit on the ground that the appellants had not followed the proper procedure. It is true that in this case at the initial stage no cenvat credit was taken. Normally the cenvat credit is taken on receipt of the inputs. It is note that no cenvat credit is taken and later somebody can avail the cenvat credit. But we have to appreciate the facts and circumstances how the present case and take a decision. The department is correct in the sense that normally cenvat credit should be taken only on receipt of the inputs by following the proper features. And if the appellants are using the inputs for both dutiable and exempted products, then they should maintain separate accounts and they should not take credit for the inputs used in the exempted products. In case they don't, they are not able to maintain separate accounts for the inputs used in the exempted and dutiable products, then they have to pay 10% of the sale value of the exempted products. These are all the prescribed procedures. But even in this case, initially they did not take the cenvat credit for the simple reason that the final product was exempted and they did not have any plans to clear one intermediate product on payment of duty. However, when they were compelled by the business agencies the clear part of the intermediate product on payment of duty we chose to calculate the duty liability on the inputs used and took them as cenvat credit. The revenue proceeded against, then the appellants and the commissioner has confirmed the demand of the irregular credits. The appellants had cited a large number of case laws, which are reproduced below: