By TIOL News Service

CHENNAI, MAR 19, 2019: THE question before the Larger Bench was –

"Whether, during the period March, 1996 to May, 1998, a manufacturer of final product, who procured inputs and availed MODVAT credit thereon, was entitled to remove the inputs as such, without reversal of the credit or payment of equivalent amount of duty, to a 100% EOU under CT-3 certificate in terms of Notification No.1/95-CE dated 04.01.1995."

And it was held thus –

"6.8 We hold that the Notification 1/95 is not applicable to the present case and the clearances are governed only by the provisions of Rule 57F. We hold that the inputs cleared as such by the appellants to 100% EOUs can not be deemed to have been manufactured by the appellants; the supplies (which are deemed exports) can not be treated on par with export under bond for the purpose of Rule 57F. There is no warrant or justification to extend the instructions dated 31-12-1996 issued by the Ministry/Board to cover supplies to 100% EOU which are treated as deemed exports for certain purposes under EXIM Policy. The appellants are not entitled to remove the inputs without reversal of the credit or payment of equivalent amount of duty."

The contrary view taken by the tribunal in the case of Gharda Chemicals Ltd - 2006-TIOL-145-CESTAT-MUM and other cases was overruled.

We reported this Larger Bench order dated 10.10.2008 as - 2008-TIOL- 1905-CESTAT-MAD-LB.

The assessee has challenged this order before the Madras High Court.

Both sides fairly submitted that the questions of law raised in this appeal were considered by the High Court in the case of M/s. Lakshmi Machine Works Limited vs. The Customs, Excise and Service Tax Appellate Tribunal, Chennai and Another [C.M.A.Nos.2197 to 2201 of 2005: dated 26.09.2018] and in the said case, after taking note of the decision of the Division Bench of the High Court of Karnataka in the case of CCE, Bangalore- II vs. Solectron Centum Electronics Ltd. - 2014-TIOL-1652-HC-KAR-CX (2014-TIOL-22-SC-CX), the High Court hadallowed the appeals by setting aside the common order and remanding the matter to the Tribunal for fresh consideration.

The appellant pointed out that the impugned order is a Larger Bench order whereas the order that was the subject matter of challenge in M/s.Lakshmi Machine Works Limited was an order passed by the Division Bench.

The High Court observed that the appeals (in the referred case) were entertained on the substantial questions of law raised by the assessee and the matter was remanded, by following the earlier decisions, for fresh consideration.

Concluding that it was not persuaded to take a different decision in the instant case, the Civil Miscellaneous appeal was allowed.

Setting aside the LB order, the matter was remanded to the Tribunal for fresh consideration in terms of the observations in M/s.Lakshmi Machine Works Limited (supra).

(See 2019-TIOL-626-HC-MAD-CX)