Pradeep Jain - Chartered Accountant

PJ/Case Laws/2010-11/08

Case Laws

Prepared By:

CA Pradeep Jain,

Megha Jain,

Parag Ghate and

Sukhvinder Kaur, LLB [FYIC]

Case: Ashish Metal Rolling Mills v/s Commissioner of Central Excise

Citation: 2010 (18) STR 531 (Guj.)

Issue: When the order passed by different authorities considering separate contentions and the Tribunal takes a long time to come out for an order for which hearing already held long back. Can in such circumstances the order of the Tribunal be considered as passed taking in account proper considerations?

Brief Facts: The appellant filed a refund claim of duty for the period of 13-10-1980 to 19-10-1986 of the amount Rs. 13, 64,368/-. The Adjudicating Authority rejected it on the principle of unjust enrichment. The Comm (A) partly allowed the refund claim; against this the appellant went to the Tribunal where the order was issued after approximately two and half years after the hearing. The order was just passed after considering the written submissions. The last sentence of the order itself showed that the facts had been mixed up with some other case by the Tribunal.

Appellant’s Contention: The appellant just for its contention proposed two questions:

1. Whether in Facts and Circumstances of the case, the customs, Excise and Service tax Appellate tribunal was in error in holding that both the lower authorities had rejected the refund claim filed by the appellant on the ground that the respondent had failed to discharge the burden as regards the payment of duty having not been passed on to others ?

2. Whether in the facts and circumstances of the case, the Customs, Excise and Service Tax Appellate Tribunal was justified in allowing Appeal filed by the Commissioner of Central Excise, Ahmedabad?

Respondent’s Contention: The respondent had failed to discharge the burden.

Reasoning of the Judgment: The first page of the impugned order itself records the date of hearing and the date of decision as 7-6-2004 and 5-1-2007 respectively i.e. a period of nearly 2.5 years had elapsed between the date of hearing and the date of order. This shows that the Tribunal has mixed up the facts of the case with some other case. The Comm (A) had not rejected the refund claim filed by the appellant on the ground that the respondent had failed to discharge the burden. The commissioner had partly allowed claim of duty on the amount that was paid after 13.10.1983 under protest and so according to his decision refund Rs. 924078/- was admissible. Despite this, the Tribunal has held that Commissioner (A) has wrongly allowed part of the claim.

The last sentence of the order said that without recording as to what was the contention raised in the written submission filed by the respondent, the tribunal has merely recorded that the written submission filed by the respondents have been duly considered. The sentence itself indicates that the said sentence has been inserted after the order was made.

Without recording any opinion on merits of the dispute between the parties as to entitlement and admissibility of the refund claim claimed by appellant. In such circumstances, the assessee, is required to be heard afresh by the Tribunal.

Decision: Case remanded back to be decided afresh.

******

Case: Commissioner of Cus. & C. Ex., Raipur versus Heg Ltd.

Citation: 2010 (18) S.T.R. 446 (Tri. – Del.)

Issue: Whether service used as inputs in relation to the business activity can be denied from Cenvat credit under the Cenvat Credit Rules, 2004?

Brief Facts: The respondent was a manufacturer of sponge iron. There were some service that were used by them in connection with the business activities. Services in relation to input were used of rent a cab, courier, mobile and commission on sale. Cenvat credit was disallowed under the Rule 2(1), 3 and 14 of the Cenvat Credit Rules, 2004.

Appellant’s Contention: The services were not used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of their final product or in connection with the clearance of the final product from the place of removal.

Respondent’s Contention: The respondents contention were based on the following points-

(a) The term ‘input services’ was defined. It analysis was made saying that it includes variety of services used in relation to setting up, modernization, renovation or repairs of factory, premises of provider of output service or an office relating such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business upto the place of removal etc.

(b) The commission on sale was clearly related to sales promotion activities.

(c) The courier services used by them were analogous to the GTA. As they were used in respect of receiving and sending of communication in relation to the business i.e. sale purchase and related activities.

(d) For the mobile services, the case of CCE, Bhavnagar v. Saurashtra Chemicals Ltd. and Grasim Industries v. CCE, Jaipur–II was relied upon.

(e) The rent – a – cab services were used in or in relation to transport of employees and the officials involving manufacturing and related activities of the company. Further to support the contention they relied upon the decision of CCE, Nasik v. Cable Corporation of India Ltd.

Reasoning of the Judgment: The credit on service tax paid in mobile services was allowed considering the decision of the tribunal in the case of Grasim Industries and Saurashtra Chemicals Ltd. For credit in respect of rent–a–cab service the case cited by the assessee was considered. Commission on Sale clearly relates to “Sales Promotion” expenses. The definition of input Services specifically includes “Sales Promotion”. The Commissioner (A) decision on Credit on courier services was upheld holding that the same has been used in connection with the business activities of the company. For mobile services, rent–a–cab services and the services for which commission on sale was paid also the same view was kept. The services were clearly used in connection with the business activities of the company.

Decision: Appeal rejected.

******

Case: CCE, Noida versus Polytron & Fragrances India (P) Ltd.

Citation: 2010 (253) ELT 673 (Tri.–Del.)

Issue: Whether at the time of clearance of burnt/damage machinery the amount equal to the Cenvat credit originally taken was required to be paid/reversed?

Brief Facts: Respondents are manufacturer of Flexible Packaging Laminate, Flexible Packaging Laminate Pouch and Paper coated Plastic, chargeable to Central Excise Duty under Chapter 39 and 48 of the Central Excise Tariff. They had purchased duty paid capital goods of value Rs. 52 lakhs during the period from Oct' 99 to Nov' 03, in respect of which they had taken cenvat credit as per the provisions of Cenvat Credit Rules. In Sept' 2004, there was a fire accident in the factory in which there was total loss of plant & machinery as well as of the stock of raw-material and finished goods. The "burnt capital goods" were sold in Feb, 2005 for a lesser amount of Rs.3, 30, 000/-. At the time of sale, duty amounting to Rs.60, 384/- was paid. Department contended that the capital goods have been removed as such and accordingly, as per Rule 3 (5) of Cenvat Credit Rules,2004, at the time of sale of the "burnt capital goods", the credit originally taken should have been reversed. Accordingly, show cause notice was issued to the Respondent demanding differential duty as per Rule 3(5) with interest and also for imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. The Additional Commissioner confirmed the demand with interest and imposed penalty of equal amount on the Respondent. In appeal, the Commissioner (Appeals) set aside the adjudication order and allowed the appeal. Against this order Revenue has come in appeal before the Tribunal and Respondent have filed Cross Objection.

Appellant’s Contention: Revenue pleaded that the goods sold were described in the sales invoices as "burnt plant and machinery", which shows that the goods had retained their identity as capital goods. Only for this reason the Adjudicating Authority had held that this is a case of removal of capital goods as such. It was contended that during the period of dispute, as per the provisions of Section 3(5) of Cenvat Credit Rules, 2004, in the event of removal of any cenvated capital goods as such an amount equal to the credit was required to be paid. It was contended further that the Commissioner(Appeals) had relied upon the Tribunal's judgment in the case of Madura Coats Pvt. Ltd. vs CCE [2005 (190) ELT 450] but the Larger Bench of the Tribunal in the case of Modernova Plastyles Pvt. Ltd. vs CCE, Raigad [2008 (232) ELT 29] had held that the expression 'as such' in Rule 4(5)(a) of Cenvat Credit Rules, 2004 does not have any connection with capital goods being new, unused or used and covers both capital goods cleared without being put to use as well as after being to be used. It was contended that in view of this at the time of clearance of Cenvat capital goods, even if after use, in accordance with the provisions of Rule 3(5) of Cenvat Credit Rules, an amount equal to the credit originally taken is required to be reversed.

Respondent’s Contention: Respondent pleaded that on account of fire accident in the factory in Sept.' 04, the intimation about which had been given to the Department on 15.9.04, there was total loss of the plant and machinery. That machinery was no longer capital goods capable of being used for manufacture of any product and for this reason; the same had been sold as scrap. That in view of this, the machinery which has been sold as scrap, had lost its identity as capital goods and, therefore, this could not said to be a case where cenvated capital goods have been removed as such. Reliance was placed upon the judgment in the case of CCE vs Geeta Industries [2009 (249) ELT 99] wherein the Tribunal had upheld the payment of duty on transaction value in the case where the cenvated capital goods are sold after some use. He pleaded that the sale of the burnt plant and machinery was a bonafide sale and no amount over and above that mentioned in the invoice had been received by the Respondent and in view of this, duty had been correctly paid.

Reasoning of the Judgment: The Tribunal held that there was no dispute that there was fire accident in the Respondent's factory in Sept' 04. The Respondent sold the damaged machinery described as "burnt plant & machinery alongwith accessories" in Feb' 05 for total amount of Rs.3,30,000/- on which duty amounting to Rs.60,384/- was paid. The Tribunal found that the Department did not dispute that there was fire accident in the Respondent's factory and there was total loss of plant and machinery. The fact that the machinery was purchased for value of about Rs.52 lakhs during 1999-2000 period had been sold in Feb' 05 in Rs.3,30,000/- indicates that the same had been sold as scrap only. There is no evidence produced by the Department that the machinery sold was not scrap but was usable capital goods. In view of this, it cannot be said that the capital goods had been removed as such. The duty has, therefore, been correctly paid on the goods on the transaction value. No infirmity in the impugned order.

Decision: Appeal dismissed. Cross Objection also disposed of.

******

Case: Himanshu Traders versus Commissioner of Central Excise & Customs.

Citation: 2010 (253) ELT 520 (Guj.)

Issue: Whether the petition to the court can be filed in case where the Tribunal has rejected to consider the key contentions prevailing to support the case?

Brief Facts: The appellant filed the petition before the court that there was an error in the order passed by the Tribunal. The Tribunal has not considered the Apex court decision with the reference to the case of clubbing of companies for SSI exemption. Further the circular relating to this aspect was also not considered by the Tribunal.

Appellant’s Contention: They submitted that there was an error in the order passed by the Tribunal as the issue was covered by the decision of the Hon’ble Apex Court in the case of Supreme Washer (P) Ltd. v. Commissioner of Central Excise, Pune, [2003 (151) E.L.T. 14 (S.C.)]. They said that there was a Circular bearing No. 6/92, dated 29-5-1992 to the effect that the Company cannot be clubbed with other units for the purpose of separate exemption limit but in the original order, the Company was clubbed with firms for the purpose of value of clearance.

Reasoning of the Judgment: There was an apparent mistake in the impugned order of the Tribunal dated 28-6-2004. The issue directly related to the decision of the Hon’ble Apex Court. The Tribunal has rejected to consider the Apex Court decision and the circular and rejected the Ratification of Mistake Application only on the ground of limitation. The Tribunal should have decided the issue considering these two aspects of the matter.

Decision: Case remanded.

*********

Case: CCE, Aurangabad vs. Trans Delta Electricals.

Citation: 2010-TIOL-765-Cestat-Mum

Issue: Whether the ER-1 returns are valid for intimating the department about the Notification availed by the assessee? Whether after the ER-1 return the liability of finding its validity will be of the department? In such a case can extended period be invoked?

Brief Facts: The respondents were engaged in the manufacture of Electrical Transformers. A show cause notice asking 10% of the price of exempted goods cleared during the period from August 2006 to May 2007 amounting to Rs.4, 37, 100/- under Rule 14 of the CENVAT Credit Rules read with proviso to Section 11 A (1) of the Central Excise Act, 1944 with interest and penalty under Rule 15 of the Cenvat Credit Rules, 2004 should not be asked for. Extended period was also invoked. The respondent has cleared their finished product i.e. Electrical Transformer on payment of Central Excise duty as well as at the rate of nil rate of duty, availing the benefit of exemption vide notification no. 6/2006-CE dated 01.03.2006 and availing the facility of CENVAT credit as well. The adjudicating authority confirmed the duty demand along with interest and penalties. The Commissioner (Appeals) dropped the demand for the extended period. Aggrieved from the same the Revenue was before Cestat.

Appellant’s Contention: The appellant submitted that the respondent was clearing their final product which is exempt. No separate accounts are maintained on the duty paid goods and exempted goods. So the assessee was liable to reverse the 10% value of the exempted goods availed as CENVAT credit. It was further submitted that in the ER-1, the respondent has mentioned goods are exempted but did not give any details to the department and it is the duty of the respondent to furnish each and every detail to the department for the exempted goods. Accordingly, the extended period is invokable and impugned order is to be set aside.

Respondent’s Contention: Written submissions were filed by the respondent.

Reasoning of the Judgment: It was found that the respondent has mentioned in the ER-1 returns about the clearance of the exempted goods. The department has not verified the entry claiming exemption. It was the duty of the department to verify the exemption sought by the appellant to the extent why the exemption has been claimed and whether the credit has been reversed or not? which the department has failed to do. So it was well within the knowledge of the department that the goods have been cleared as exempted goods, the said fact also has been confirmed by the Superintendent of Central Excise in his report to invoke extended period. The ER-1 returns, which were being filed periodically by the respondent were its proof. The show cause issued on 17.1.2008 for the period 1.8.2006 to 10.5.2007, the period prior to 18.1.2007 is barred by limitation. The CESTAT also held the same view as the Comm. (A).

Decision: Appeal rejected.

******

Case: Trent Limited vs. Union of India.

Citation: 2010–TIOL–402–HC–AP–ST

Issue: Whether the amendment done for renting of Immovable property in the Finance Act, 2010 by the provisions of Section 66 (105) (zzzz) have an applicability for the retrospective period also?

Brief Facts: The petitioner is a company incorporated under the provisions of the Companies Act, 1956. It is running the business of retail stores by taking shops/premises on rent or on licence. It is aggrieved by the provisions of Section 66 (105) (zzzz) as amended by the Finance Act, 2010, whereby with others the renting of immovable property is brought within the ambit of a service and is made liable to tax under the provisions of the service tax matrix of the Finance Act, 1994.

Appellant’s Contention: Appellant urged several contentions to buttress the grounds of challenge to the impugned provisions, including that the renting of immovable property per se would not constitute any value addition falling within the lubric of service. They further contended that the provisions of Section 65 (105) (zzzz) are inconsistent with the service tax provisions of the Finance Act, 1994. It was also contended that the levy of service tax by an artificial expansion of the concept of service so as to defend the core of the legislative power of the state under entry 49 of List II of VII Schedule to the Constitution of India which reads "Taxes on lands and buildings" is beyond the legislative competence of the Parliament. Also the shed of the decision of the learned Division Bench of the Delhi High Court in the judgment dated 18/04/2009 in Home Solution Retail India Ltd., V. Union of India and others in W.P.(C) No.1659 of 2008 was taken. The bench had further observed inter alia (while interpreting the provisions of Section 65 (105) (zzzz), that the provisions stood prior to the amendment by the Finance Act, 2010), that the renting of immovable property for use in the course of or furtherance of business of commerce by itself cannot constitute service. Therefore, the legislative dynamics qua the provisions of the Finance Act, 2010, would not be a valid exercise as a validating legislation to remove the substratum of the ratio of the judgment of the Delhi High Court. Appellant also contended that the provisions of Section 65 (105) (zzzz) have been given retrospective efficacy qua Section 77 of the Finance Act, 2010 by purporting to be in the nature of validation of action taken under sub-clause (zzzz) of clause (105) of Section 65 and that such retrospective operationalisation of a taxing provision is arbitrary, independent of the question whether the Parliament had the legislative competence to enact Section 65 (105) (zzzz) as enacted in the Finance Act, 2010.

Reasoning of the Judgment: The contentions urged by the petitioner, though were supported by the decision of the HC were warranting interdiction to an extent of the operation of the provisions of Section 65 (105) (zzzz) in so far as their prospective application is concerned. The appellant with regards to the retrospective applicability of the provisions has challenged on more substantial grounds. As there were further orders pending in this application or in the writ petition, the respondents were directed not to initiate any coercive steps for recovery of the service tax on the renting of immovable property on the basis of the provisions of Section 65 (105) (zzzz) as amended by the Finance Act, 2010, for the period 01/06/2007 to 01/04/2010.

Decision: Retrospective tax liability stayed for the period subsequent to 01/04/2010 subject to the result of the writ petition, notice.

******

Case: Commissioner of Central Excise Commissionerate, Chandigarh v/s M/s Ranbaxy Labs Ltd

Citation: 2010-TIOL-355-HC-P&H-CX

Issue: Whether the Tribunal is correct in allowing the credit on the facts of the case when the fresh goods were received without payment of duty in the guise of reprocessed goods.

Brief Facts: Respondent-assessee are engaged in manufacture of Bulk Drugs falling under Chapter 29, PP Medicaments falling under Chapter 30 and Enzymes (Pencillin-G Acylase) falling under Chapter 35 of the Schedule to the Central Excise Tariff Act, 1985. They manufactured Bulk Drugs of Pencillin from their unit situated in Ponta Sahib and sent the same after payment of duty to their Mohali Unit and in Mohali Unit, it transpired that manufacture was defective and the same was sent back to Ponta Sahib unit. After re-processing and re-manufacturing of the defective goods, the same were sent back to Mohali Unit and thereafter sold. The Department raised demand on the ground that the manufacturer is liable to pay the duty on the re-processing of manufactured bulk drugs by the respondent. Demand was confirmed and upheld by the Commissioner (A) in appeal. In further appeal to the Tribunal, it was held that the re-processing of defective goods did not amount to manufacture and set aside the demand. Hence, Revenue is in appeal.

Appellant’s Contention: Revenue contended that as the goods have been manufactured afresh, therefore, the respondents were liable to pay the duty.

Respondent’s Contention: Respondent contended that as the duty has already been paid on the goods, which were manufactured earlier and the same were not sold and sent back being defective in nature, therefore, no fresh duty is liable to pay the assessee. Reliance was placed on the case of Commissioner of Central Excise, Delhi-III, Gurgaon Vs. M/s Maruti Udyog ltd. Palam Gurgaon Road, Gurgaon [2010-TIOL-145-HC-P&H-CX] wherein a Division Bench of the High Court has held that “no duty can be demanded in respect of repaired vehicles that were exported as also internally damaged vehicles that were cleared on payment of duty under Rule 173H and 173L of Central Excise Rules”.

Reasoning of the Judgment: The High Court held that the judgment given in the case of M/s Maruti Udyog ltd. Palam Gurgaon Road, Gurgaon as relied upon by the respondent clearly applied to the present case.

Decision: The question answered in favour of the assessee and against the revenue. Appeal dismissed.

******

Case: Puja Enterprises v/s Union of India

Citation: 2010 (254) E.L.T 65 (Bom.)

Issue: Whether the bona-fide purchaser of licence can be denied the benefit due to any defect in the Licence?

Brief Facts: Petitioner purchased two licenses for valuable consideration which were originally issued in favour of M/s Betul Oils and Flours Ltd. They accordingly used the said licences at the time of import of Vitamin B2 Riboflavin (feed grade 96%) for payment of duty. The Adjudicating Authority passed an order confiscating the goods in exercise of powers under Section 111(d) of the Customs Act, 1962 and imposed a redemption fine of Rs 3 Lacs along with penalty of Rs 20,000/- under Section 112(a) of the Act. Duty free clearance of the goods was denied to the petitioner. In appeal, the Tribunal gave finding that though the licences were transferred in the name of the petitioner, they were handed over to the Customs by another person as such these licences could not be treated to have been held and tendered by the petitioner to the Mumbai Custom House. Thus, it was held that such imports under these licences were not valid. Petitioner is thus in appeal before the High Court.

Petitioner’s Contention: Petitioner contended that they were bona fide transferee of the said licenses. It was contended that the licences were valid on the date of import and filing of the Bill of Entry. Since the goods imported by the petitioner were covered under the said licences, the Customs Authorities were bound to accept the licences and debit them to the duty amount. They could not have held that the imports were invalid.

Respondent’s Contention: Revenue stated that these licences are in possession of the SIIB Department. Be that as it may, the licences are admittedly in possession of the Revenue. They submit that they have agreed to hand over these two licences to the person who had originally given the same to the Customs Department within one week so as to complete the adjudication process.

Reasoning of the Judgment: The High Court held that as there is consensus between the parties, the Order-in-original and consequent Order of the Tribunal are set aside and matter is remitted back to the Commissioner of Customs (Import), the Adjudicating Authority to adjudicate and decide as to whether or not the licences produced covered the goods imported by the petitioner. The adjudication process should be completed within two weeks after the petitioner producing the licences before the adjudicating authority. It is made clear that even if the licences are found to have expired while in the custody of the department, the Customs Authorities shall not raise any objection on that count, if they find that the goods imported by the petitioner were covered by the subject licences since the litigation in this behalf was pending. Pendency of litigation is not expected to cause prejudice to the petitioner.

Decision: Petition disposed of in terms of this order.

********

Case: M/s Anand Agencies v/s Commissioner of Central Excise (Service Tax) Coimbatore

Citation: 2010–TIOL–364–Cestat–MAD

Issue: Penalty under Section 78 as well as under Section 76 cannot be imposed together.

Brief Facts: The Adjudicating Authority had imposed penalty on the appellant under the provisions of Section 78 of the Finance Act, 1994 and dropped proceedings for imposition of penalty under Section 76. In revision, the Commissioner had imposed a penalty under Section 76. The penalty imposed by the Commissioner is challenged by the appellant.

Reasoning of the Judgment: The Tribunal held that penalties under Section 76 and Section 78 cannot be imposed simultaneously. Reliance was placed on the judgments given in the cases of Opus Media and Entertainment v/s Commissioner of Central Excise, Jaipur [2007 (8) S.T.R.368 (Tri.-Del.)], Commissioner of Central Excise, Raigad Vs Shield Security Force [2008 (9) S.T.R.215 (Tri.-Mumbai)], Remac Marketing (P) Ltd. Vs Commissioner of Service Tax, Kolkata [2009 (13) S.T.R.658 (Tri.-Kolkata)] wherein it was held that Sections 76 and 78 are mutually exclusive. Accordingly, penalty under Section 78 is maintained and penalty under Section 76 of the Finance Act, 1994 is set aside.

Decision: Appeal allowed.

********

Case: Commissioner of Central Excise, Allahabad v/s Dey’s Medical (P) Ltd

Citation: 2010 (253) ELT 648 (Tri-Del)

Issue: Interest was leviable on credit taken on returned goods which were not re-processed. When the issue was regarding the interpretation of legal provisions, then no penalty can be imposed.

Brief Facts: Respondent-assessee are engaged in the manufacture of P & P medicines and perfumed hair oil. They were clearing coconut hair oil on payment of duty to the depots. Some quantity was returned from the depot during 23.03.04 to 06.04.02 from the depots as being unfit for sale. Respondent took credit of the duty originally paid on the clearance of the said goods. Part of the returned oil was reprocessed and found to be marketable and was cleared to the depots for sale. The rest of the returned oil was decided not to be reprocessed. Accordingly, the respondent reversed the credit on the said returned oil which was not re-processed.

The original Authority held that the goods were not capable of being re-processed and therefore, the entire credit was wrongly taken and interest was demanded from the date of taking of credit till the date of reversal of credit. Penalty of Rs. 10, 000/- was also imposed. Against this decision, appeal was filed by the respondent challenging the demand. And Revenue filed appeal for enhancing the penalty. The Commissioner (Appeal) allowed the appeal of respondent-assessee and rejected the appeal of the Revenue.

Thus, Revenue is in appeal and Respondent has filed cross objections to the appeal.

Appellant’s Contention: Revenue contended that the respondent had not acted bone fidely in bringing back the goods to the factory for re-processing after declaring that the goods were not fit for sale. At any rate, substantial quantity of the goods returned had not been reprocessed at all. Therefore, credit taken under Rule 16 was not justified. Revenue also contended for imposition of penalty equal to the interest leviable on the credit illegally taken.

Respondent’s Contention: Respondent submitted that the goods were not marketable in the condition in which they were retuned to the factory. Earnest efforts were taken to re-process the goods and part of the goods were re-processed and cleared thereafter on payment of duty. Therefore, taking of credit and utilizing of credit was justified. That once they had decided that the rest of the goods could not be reprocessed, they have paid the credit involved on such goods on 09.04.2005. Therefore, there is no irregularity. Thus, no question arises for demanding interest. Also, the issue involved is regarding the interpretation of provisions of Rule 16 of the Central Excise Rules and no penalty was warranted.

Reasoning of the Judgment: The Tribunal held that Rule 16 envisages that the goods which were cleared on payment of duty can be brought back for the purpose of re-processing, reconditioning etc. In such a situation the credit of duty paid originally could be taken treating the returned materials are “inputs”. It also envisages that the goods so returned should be subject to re-processing. In the present case, only part of the returned goods were re-processed and cleared on payment of duty, there was no irregularity as they were covered under Rule 16 of the Central Excise Rules. No interest is required to be paid.

In respect of returned goods which were not re-processed, provisions of Rule 16 were not attracted. Therefore, credit taken was not valid. Therefore, since the credit taken was not regular and was utilised by the respondent, interest is payable on such credit.

The Tribunal held that the Original order was demanding interest in respect of the entire credit including the credit taken on those goods which were processed and cleared on payment of duty subsequently. Said order modified to that extent and interest is to recovered on the credit taken on returned goods which were not subjected to any process.

With regard to penalty, the Tribunal held that the case involved issue of interpretation of Rule 16 and therefore, no penalty was warranted.

Decision: Appeals and Cross Objections disposed of accordingly.

********

Comments

PJ/Case Laws/2010-11/08

Case Laws

Post a Comment

Query