Deemed Credit Availability of

PJ/Case Laws/2011-12/1365

Case: SHREE NARAYAN DYG. & PTG. MILLS Versus COMMR. OF CENTRAL EXCISE, SURAT

Citation: 2011 (270) E.L.T. 689 (Tri. - Ahmd.)

Issue:- Deemed credit is available to Job worker also.

Limitation –show cause notice after five years – demand not sustainable.

Brief Facts:- Appellant is an independent processing house carrying out activity of processing of grey fabrics and converting them into processed fabrics on job work basis. M/s. Avinash Exports, merchant exporter filed a rebate claim amounting to Rs. 89, 16,316/- and obtained rebate against 46 consignments of processed fabrics. Later it was found that 46 shipping bills, bills of lading etc. submitted by them were forged and no goods were exported.

The show cause notice was issued and the Adjudicated Authority confirmed the demand with interest and imposed penalty.

The Commissioner (Appeal) in appeal while confirming the Order-in-original re-determined the amount recoverable as Rs. 7,52,919/- and also reduced the amount of penalty.

Appellant is in appeal before the Tribunal.

Appellant’s Contention:- Appellants submitted that the department cannot allow M/s. Avinash to retain the export rebate and recover the same by denying the deemed credit to the appellant; that the department cannot prefer the statement of M/s. Avinash and arbitrarily ignore other exculpatory statements. They argued that the exculpatory statements were supported by documentary evidence in the form of entries in cenvat credit registers, central excise invoices and payment of duty as not only made by utilisation of deemed credit but also through PLA to the extent of 33% of the duty amount. The payment of job charges by cheque was also received by them. The appellant also submitted that they had already deposited the duty demanded i.e. Rs. 7,52,919/- though the penalty was not deposited.

Reasoning of Judgment:- The Tribunal noted that as per Notification No. 6/2002-C.E. (N.T.), dated 1-3-2002, under which the credit was availed, the manufacturer of processed fabrics is entitled to avail deemed cenvat credit to the extent of 66.67% of the duty payable on finished goods. It is not a pre-requisite that there should be a co-relation between the inputs, in this case, grey fabrics and the duty paid invoices or the inputs. The department, however, accepted 33.33% of duty paid in cash. Therefore, benefit of deemed credit under Notification No. 6/2002-C.E. (N.T.), cannot be denied.

In this context, the Tribunal relied upon the observation of this bench in the case of Shree Slily Vijay Processors Pvt. Limited v. CCE, Surat [2011 (264) E.L.T. 540 (Tri.- Ahmd.)].

The Tribunal also noted the judgment given by the Mumbai Tribunal in the case of CCE, Nasik v. Jain Irrigation System Limited [2008 (227) E.L.T. 587 (Tri. - Mumbai)] wherein noting the fact of payment of duty from PLA by the assessee therein it was noted that no prudent man will pay duty to the government without actually receiving the grey fabrics. The Mumbai Tribunal had held that this fact tilted the weight of the evidence in favour of appellant and by paying duty on final product the assessee had reversed the deemed credit in addition to payment of duty out of PLA. It was held that goods were processed by the appellants and cleared on payment of duty. The fact that rebate claim documents by M/s Avinash Exports have been found forged, cannot have any reflection on the appellant’s present case.

The observation made by the Mumbai Tribunal in the case of CCE, Nasik v/s Jain Irrigation System Limited [2008 (227) ELT 587 (Tri-Mumbai)] was also considered that “We are not for a moment suggesting that the applicant could have taken the credit in spite of final goods being exempted all that we have said is that on payment of duty on the final product, which was not otherwise payable, the assessee shall be deemed to have reversed the credit taken by them, which in another word would amount to not taking the credit at all. Thus, there is no mistake in out order on this account”. It is the acceptable fact that the appellants are eligible for the deemed cenvat credit on the processed fabrics cleared by them and for availing deemed cenvat credit, it is not required to prove that the grey fabrics are duty paid as they do not required any duty paying documents for availing deemed cenvat credit.

The Tribunal, therefore, have no hesitation to state that appellants were right in availing the deemed cenvat credit on the processed fabrics cleared to M/s. Avinash Exports.

Further, on question of limitation, the Tribunal found that the grey fabrics were received by appellant under the cover of challans and invoices and after processing, the clearance was done on payment of duty under the cover of Central Excise invoices and ARE-Is on making necessary entries. Necessary monthly returns also seem to have been filed. The show cause notice was issued on 4-5- 2007, whereas the clearance of grey fabrics were made on 30-4-2002 and 2/3-5- 2002, i.e. after five years. Therefore, invoking the extended period of limitation in this case is not justified. Impugned order set aside with consequential relief.

Decision:- Appeals allowed.

Comment:- It is very good decision wherein it is held that when the part of duty is paid from PLA then it proves the genuineness of the appellant as no prudent man will clear the goods after payment from PLA without clearing the goods.

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PJ/Case Laws/2011-12/1365

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