Metallised plastic film – non excisable – no need to reverse credit – but since when?
In METLEX (I) PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE, NEW DELHI - , the Supreme Court on 12.02.2004 held that Metallising or laminating of duty paid film does not amount to manufacture as it starts with film and remains a film even after lamination; If no manufacture has taken place mere filing of classification list does not mean that the assessee is liable to pay duty . Now some assessees must have paid duty on the non excisable goods on pressure from the Department and their buyers must have taken credit of the duty paid and the same Department must have tried to deny credit on the ground that what was paid was not duty as the goods were not excisable in the first place! This is how the Department works!
By Finance Act, 2007, a new Section 5B was inserted in the Central Excise Act, which reads as,
5B . Non-reversal of CENVAT credit. -
Where an assessee has paid duty of excise on a final product and has been allowed credit of the duty or tax or cess paid on inputs, capital goods and input services used in making of the said product, but subsequently the process of making the said product is held by the court as not chargeable to excise duty, the Central Government may, by notification, order for non-reversal of such credit allowed to the assessee subject to such conditions as may be specified in the said notification:
Provided that the order for non-reversal of credit shall not apply where an assessee has preferred a claim for refund of excise duty paid by him:
Provided further that the Central Government may also specify in the notification referred to above for non-reversal of credit, if any, taken by the buyer of the said product.
Making use of this Section, now, the Government has issued a Notification stipulating that
credit taken or utilized, of the duty or tax or cess paid on inputs , capital goods and input services used in the making of the said final product, shall not be required to be reversed, irrespective of the fact that the process of metallization of duty-paid film was held as not amounting to manufacture by the Supreme Court in Civil appeal Nos. 3224-3225 of 1998 with C.A. No. 5716 of 1998, decided on the 12th February,2004 in the case of M/s Metlex (I) Pvt. Ltd. Vs Commissioner of C.Ex . New Delhi, subject to following conditions, namely:-
(a) the said non-reversal shall be allowed only for the CENVAT credit taken upto the 12th February,2004 .
(b) the said non-reversal shall be allowed only when excise duty has been paid on removal of the said final product.
(c) the said assessee shall not prefer a claim of refund of the excise duty paid by him on the said final product:
Provided that the CENVAT credit, if any, taken by the buyer of the said final product, of the excise duty paid by the said assessee on the said final product made and cleared upto the 12th February,2004 shall not be required to be reversed.
Now, as per the Notification, only the credit taken on the duty paid up to 12.02.2004, need not be reversed, which means the duty paid after 12.02.2004 is not allowed. What is the logic? The Supreme Court declared on 12.2.2004 that the goods were not excisable. But then how do people of this country know the judgements passed by the Apex Court? The Government has no system of collecting and publishing them. Even the Government realised this after more than four years but it expects the assessees to know about the judgements immediately after the judgement is pronounced. Maybe now every assessee should keep a representative each in the Supreme Court, in all the High Courts and Tribunals and in the Board office!
The Board's benevolence will now launch a large number of Show cause Notices.
Notification No. 22/ CX ., ( N.T. )., Dated May 2, 2008