The Commissioner of Central Excise vs I.T.C. Limited

B.V. Nagaratana, J.—The revenue has preferred this appeal by challenging the order dated 28.08.2006 in Final Order No. 826/2006 passed by the Appellate Tribunal, Chennai by raising the following substantial question of law which was framed by this Court on 3.07.2007;

i) Whether the Tribunal was right in rejecting the appeal of the Appellant when the assessee was required to follow the procedure prescribed under the provisions of Rule 57CC(9) and 57AD(2) and to maintain separate records for receipt and use of inputs for the manufacture of such exempted goods cleared in their own unit?

The facts of the case leading to the filing of this appeal are as follows; According to the appellant, the respondent/assessee is a manufacturers of Cut Tobacco and Cigarettes falling under chapter 24 of the Central Excise Tax Act, 1985 and has been availing Modvat Credit on the inputs from 01.03.2000 In respect of the period April 2000 to 28.2.2001, a show cause notice dated 2.04.2001 was issued demanding an amount of duty as well as penalty was imposed under Rule 173Q read with Rule 9(2) of the Central Excise Rules, 1944 by contending that the assessee had failed to take credit on the quantity of in puts which was intended for use in the manufacture of said dutiable goods and had failed to maintain separate accounts and also not paid duty @ 8% of total price on such goods on the exempted products as contemplated under relevant rules. Another show cause notice on similar terms is said to have been issued on 30.4.2001. The same were replied and adjudicated upon and an order in original came to be made on 13.8.2001, whereby the demand as well as penalty proposed to be imposed were confirmed. Being aggrieved by the said order, the respondent/assessee preferred an appeal before the commissioner of Appeals, who allowed the assessee''s appeal and set aside the order in original. As against the said order, the Department preferred an appeal before the Tribunal. The Tribunal dismissed the appeal of the Department, Being aggrieved by the said order of the Tribunal, the revenue has preferred this appeal.

We have heard the learned Counsel for he appellant and the learned Counsel for the respondent/assessee and perused the material on record.

On a perusal of the order of the Tribunal, we find that the Tribunal has taken into consideration the fact that in the case of Ballarpur Industries v. CCE. Nagpur reported in (138) ELT 94, on which reliance has been placed by the Counsel for the revenue had been challenged before the Apex Court and that the Apex Court though had admitted the matter had not issued any order of interim stay and therefore on that basis and also by taking into consideration the other decisions in the case of Escorts Ltd. Vs. Commissioner of Central Excise, Delhi, and 2005 (101) ECC 82 concluded that intermediate products manufactured using the credit availed inputs could be removed to a sister unit without payment of duty and without reversing the Modvat credit if the final products are cleared on payment of duty. It also held that when inputs are used in the manufacture of excisable goods which in turn are captively consumed in the manufacture of final products. Rule 57CC had no application, even though such intermediate stage excisable goods may be exempt from duty and used captively. Applying the said ratio the Tribunal held that in the instant case cut tobacco has been consumed captively in the Meenakonte Unit of respondent/assessee and the goods had been moved to the larger unit under bond following Chapter X procedure. The Tribunal held so, by relying upon the decision of the larger Bench in CCE v. Ballarpur Industries case which had not been stayed by the Apex Court and by following the ratio of the decision in Excorts Ltd. and Sterlite Industries (I) Limited, dismissed the appeal of the revenue.

It is now brought to our notice that the Apex Court has decided finally the case in Commissioner of Central Excise, Nagpur Vs. Ballarpur Industries Ltd., . We now feel that the ratio of the said decision would have to be applied keeping in mind the facts of the present case, to come to a conclusion as to whether stock transfer would amount to a sale or not.

Therefore, the matter is remanded to the Tribunal to consider the entire issue in the light of the decision of the Apex Court in Ballarpur Industries Ltd. While making such direction, we, however leave all contentions raised in this matter open and the same may be raised before the Tribunal.

Accordingly, the appeal is allowed without answering the substantial question of law.