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HIGH COURT OF ALLAHABAD
M. Katju and R.S. Tripathi, JJ.
Hello Minerals Water (P) Ltd.
Versus
Union of India
Civil Misc. Writ Petition 630 of 2004
Decided On : 28 July 2004
Civil Misc. Writ Petition 630 Of 2004
Central Excise Duty - Reversal of Modvat Credit - Notification No. 15/94-C. E. - [Chapter 39 of the Schedule to the Central Excise Tariff Act] - [Summary of Acts and Sections: The court discussed the issue of reversal of Modvat credit under Notification No. 15/94-C. E. and its applicability to the exemption from central excise duty for certain final products. The court referred to the decision of a five Member Bench of the Tribunal in the case of franco Italian Company Pvt. v. CCE, 2000 (120) E. L. T. 792 and the Supreme Court decision in the case of chandrapur Magnet Wire (P) Ltd. v. CC, Nagpur, (1996) 2 SCC 159. The court emphasized that the reversal of Modvat credit amounts to non-taking of credit on the inputs and should entitle the petitioner to the benefit of the notification granting exemption/rate of duty on the final product. The court also highlighted the consistent view of the Tribunal and other decisions supporting the reversal of credit even subsequent to the clearance of the final products.
Fact of the Case:
The petitioner sought a mandamus for exemption from Central Excise Duty and challenged the impugned order passed by the customs, Excise and Service Tax Appellate Tribunal, New Delhi. The issue revolved around the reversal of Modvat credit on inputs used in the manufacture of certain final products exempted from central excise duty.
Finding of the Court:
The court found that the reversal of Modvat credit by the petitioner amounted to non-taking of credit on the inputs, entitling the petitioner to the benefit of the exemption notification. The court also criticized the Tribunal's decision for not considering the consistent view of the Tribunal and other binding decisions supporting the reversal of credit even after the clearance of the final products.
Issues: The main issue involved the applicability of the exemption from central excise duty to the petitioner based on the reversal of Modvat credit on inputs used in the manufacture of certain final products.
Ratio Decidendi: The court held that the reversal of Modvat credit amounts to non-taking of credit on the inputs, entitling the petitioner to the benefit of the exemption notification. The court also emphasized the consistent view of the Tribunal and other decisions supporting the reversal of credit even subsequent to the clearance of the final products.
Final Decision: The court allowed the writ petition, set aside the demand of duty and penalty, and directed the refund of any amount already deposited by the petitioner with interest. The petitioner was also entitled to any consequential benefits.
( 1 ) THIS writ petition has been filed for a mandamus directing the respondents to give benefit of exemption from Central Excise Duty to the petitioner under notification dated 1-3-1994 and for quashing the impugned order dated 1-10-2003 [2004 (163) E. L. T. 55 (Tri.- Del.)] passed by the customs, Excise and Service Tax Appellate Tribunal, New Delhi (Annexure 1 to the writ petition) and for declaring that the benefit of Notifications 67/95 and 214/86 would be available to the petitioner.
( 2 ) IN this case on 6-5-2004 the respondents were granted one month time to file counter affidavit but as yet no counter affidavit has been filed. Hence we are treating the allegations in the petition to be correct.
( 3 ) BEFORE setting out the facts of the case we may briefly refer to the issue involved in the present petition.
( 4 ) CERTAIN final products of Chapter 39 of the Schedule to the Central Excise Tariff Act are fully exempted from central excise duty under Notification No. 15/94-C. E. , dated 1-3-1994. The condition for this exemption is that no mod-vat credit should be availed on the inputs used in manufacturing of these final products. In the present case, the credit had been availed on the inputs but had been reversed subsequently. The issue, therefore, is whether this reversal of credit after availment can satisfy the condition of non-availment of credit under the exemption notification.
( 5 ) THE petitioner is a company registered under the Indian Companies Act which is engaged in the manufacture of Aqua Mineral Water classifiable under Chapter sub-heading No. 2201. 19 (previously under Chapter sub-heading No. 2201. 90) of the Schedule to the Central Excise Tariff act, 1985. Its Unit No. 1 is located at D-18, Sector 3, Noida. The petitioner is also engaged in the manufacture of hot and cold water dispenser, classifiable under Chapter sub-heading No. 8479. 19 of the Central Excise Tariff Act. This Unit is at Sector 6, Noida. The petitioner has another Unit being Unit No. 3 for manufacturing Polycarbonate bottle and P P bottles falling under Chapter sub-heading 3923. 90 of the Central Excise Tariff Act. This Unit is situate at sector 59, Noida.
( 6 ) THE mineral water manufactured by the petitioner is sold directly to the consumers located at delhi, Noida and other adjoining places. The water is sold packed in polycarbonate/pvc bottles of different capacities of one litre, 12 litres, 24 litres, etc. The petitioner started manufacturing mineral water since December, 1993. It has obtained a registration certificate from the Central excise Department for the manufacture of the mineral water classifiable under Chapter sub-heading 2201. 90. The petitioner filed a declaration under Rule 173b indicating classification of the mineral water manufactured by it. Copies of the declaration for the period in question are collectively annexed as Annexure 2 to the writ petition. In the declaration the petitioner indicated the availment of Notification No. 1/93. Besides it also indicated that the cost of the bottles of capacities 320 ml, 500 ml and 1 litre was included in the cost of mineral water and that in respect of bottles of 12 litres and 24 litres capacity the cost of the same was not included in the value of the mineral water. The petitioner also filed declaration under Rule 173c of the Central Excise rules indicating the sale price of the mineral water vide Annexure 3 to the writ petition.
( 7 ) IT is alleged in Paragraph 13 of the writ petition that the petitioner was paying excise duty in respect of mineral water on the basis of the retail price. Subsequently on legal advice the petitioner revised its pattern of paying excise duty on the retail price and started paying duty on the wholesale price vide Annexure 4 to the writ petition. The petitioner also filed Modvat declaration under Rule 57g of the Central Excise Rules indicating the mineral water as the final product and the various raw materials like the plastic gra
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