By TIOL News Service

MUMBAI, FEB 06, 2013: KNOCKING on the wrong door can have its surprises as the Revenue would realize in the present case. A sorry sometimes does not suffice!

The applicants are engaged in the manufacture of Organic Chemicals. The demands are confirmed after denying the CENVAT credit availed of the duty paid on intermediate products supplied by M/s Godrej Industries Ltd. and M/s. VVF Ltd.

The notification drawn into the vortex of the present proceedings is notification 44/2001-CE(NT). It needs mention that the subject notification is issued in exercise of the powers conferred by rule 19 of the CER, 2001 and it notifies the conditions, safeguards and procedures for removal of excisable goods (referred to as the" intermediate goods") from the place of manufacture or warehouse without payment of duty for the purpose of use in the manufacture or processing of all articles (referred to as the "resultant articles") by a manufacturer who is an holder of a Duty Exemption Entitlement Certificate and an Advance Licence under the Duty Exemption Scheme (referred to as 'the ultimate exporter") and their exportation out of India, to any country except Bhutan.

The case of the Revenue is that the applicants were required to follow the prescribed procedure under Notification No. 44/2001-CE (NT) dated 26.6.2001 as amended and should have procured indigenous raw materials duty free from the local supplier under Advance Licence/Authorization letter. It is further alleged that the local supplier i.e. M/s Godrej Industries Ltd. and M/s VVF Ltd. colluded with the applicants and transferred their accumulated CENVAT Credit to the applicants by supplying the materials on payment of duty. Inasmuch as the two suppliers were required to supply the goods without payment of duty as per the conditions of Notification No.44/2001-CE(NT), availment of CENVAT credit by the applicant was not proper in law is the sum and substance in the proceedings.

And since the demands are of Rs.5,22,30,673/- and Rs.20,31,99,840/- respectively, the CCE, Thane-I was tempted to confirm the same. After all, he is the same adjudicating authority who had confirmed a Godzilla demand of Rs.298 Crores and which case we had reported as - (2012-TIOL-1832-CESTAT-MUM) wherein the CESTAT had granted waiver of pre-deposit of the entire duty, penalty and interest and granted Stay in the matter.

The present matter is taken to the CESTAT by both the applicants.

The Bench after extracting the provisions of Notification No.44/2001-CE(NT) noted at the outset that the same is a conditional notification.

Having remarked thus, the CESTAT observed -

“6. Further, we find that this notification is issued under Rule 19 of the Central Excise Rules and not under Section 5 of the Central Excise Act. The manufacturer has to follow the procedure laid down in the Notification. As the manufacturer has not followed the procedure, therefore, prima facie the manufacturers are not entitled for benefit of the Notification. The manufacturers cleared the goods on payment of duty and the applicants availed the credit.

7. Further, the allegation of collusion between the applicants and manufacturer-suppliers is in the show-cause notice, however, the manufacturer-suppliers have not been made party to the present proceedings. In these circumstances, the allegation of collusion is also not sustainable. As the manufacturers, who cleared the goods on payment of duty, are not party in the present proceedings and the applicants have only availed the credit of duty paid hence prima facie the applicants have a strong case for waiver of pre-deposit of dues. Accordingly, the pre-deposit of dues is waived and recovery of the same is stayed during pendency of the appeals. Stay petitions are allowed.”

After taking into account the amount in dispute, the Bench directed the Registry to list the appeals for final hearing on 27.12.2012.

In parting - Probably, the New Year 2013 has some good news in store for the appellants.

(See 2013-TIOL-228-CESTAT-MUM)