By TIOL News Service

CHENNAI, DEC 22, 2014: THE appellant is a manufacturer of agricultural tractors. For manufacture of tractors, the appellant buys raw materials, parts/components (inputs) on payment of duty. The final product, namely, tractors, was exigible to excise duty. Therefore, the appellant took credit on the duties paid on the inputs under Rule 3 of the Cenvat Credit Rules.

On and from 9.7.2004, tractors falling under Tariff item 8701 were exempted from excise duty vide Sl.No.295 of Notification No.23/2004-CE, dated 9.7.2004.

Commissioner of Central Excise issued a show cause notice alleging that the appellant has not reversed the cenvat credit taken on inputs/components lying in stock as on 9.7.2004, and on inputs/components contained in the closing stock of finished tractors lying in stock as on 9.7.2004 and confirmed the demand with interest and penalty. The appeal filed by the assessee was dismissed by the Tribunal vide - 2007-TIOL-1355-CESTAT-MAD. The assessee is in appeal before the High Court challenging the order of Tribunal.

After hearing both sides, the High Court held:

The Tribunal in the present case distinguished the appellant's own case decided by the Bangalore Bench of the Tribunal on the very same issue on the basis of the decision of the Tribunal in Albert David Ltd. case. But, the fact remains that the decision of the Bangalore Bench of the Tribunal in appellant's own case was upheld by the Division Bench of the Karnataka High Court - 2011-TIOL-242-HC-KAR-CX and the special leave petition filed by the department has been dismissed by the Supreme Court by order dated 16.9.2011. Therefore, on facts, the said decision will be binding insofar as the present case is concerned.

The introduction of Rule 11(3) of the Cenvat Credit Rules, 2004, by notification No. 10/2007-CE (NT), dated 1.3.2007 and the Tax Research Unit Circular in D.O.F.No.334/1/2007-TRU, dated 28.2.2007 clarifying that it will come into effect immediately, makes it clear that the position of law as it stood decided in the assessee's own case by the Karnakata High Court, the appeal against which was dismissed by the Supreme Court, is the correct position. The Tribunal in this case erred in distinguishing the decision of the Bangalore Bench Tribunal placing reliance on Albert David Ltd. case - 2002-TIOL-114-CESTAT-DEL. In any event, Ashok Iron and Steel Fabricators case - 2002-TIOL-274-CESTAT-DEL-LB, is a Larger Bench decision and the same has been upheld by the Supreme Court and that would be binding on the Tribunal, rather than the Two-Member Bench decision in Albert David Ltd. case.

(See 2014-TIOL-2307-HC-MAD-CX)