Case Note & Summary
Background: The appeal arose from a central excise duty demand on a company engaged in converting jumbo rolls of photographic films and trading imported ready-to-use film rolls. The company placed imported unexposed colour film rolls packed in plastic canisters into printed cartons with brand name and MRP. The Commissioner of Central Excise treated this process as manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. Facts: A show cause notice dated 29.08.2006 demanded duty of Rs.20,37,33,174 for the period 01.03.2003 to 31.08.2004, with interest and penalty, invoking extended limitation. The assessee contended the activity did not amount to manufacture, the issue was revenue neutral, and the extended period was not invocable. By order dated 28.11.2006, the Commissioner confirmed the duty under Section 11A(2), imposed equal penalty under Section 11AC, and interest under Section 11AB. The assessee appealed to CESTAT, which by Final Order No.905/2007 dated 19.07.2007 set aside the demand. The Tribunal relied on Supreme Court decision in Commissioner of Central Excise v. Narmada Chematur Pharmaceuticals Ltd. and held that the assessee was entitled to CENVAT credit, the demand was time-barred, and the admissible credit exceeded the duty demanded. The Revenue appealed to the High Court under Section 35G. Legal Issues: The appeal raised substantial questions: (1) whether Tribunal decided without recording a finding on applicability of a Larger Bench decision; (2) whether Narmada Chematur ratio was applicable; (3) whether limitation finding was correct despite alleged suppression; (4) whether penalty would survive if the demand was revenue neutral; (5) whether CENVAT credit would apply when CVD was paid through DEPB scrips. The assessee raised a preliminary objection on maintainability, arguing that the matter involved determination of rate of duty, thus falling under Section 35L and not appealable under Section 35G. Arguments: Revenue argued excisability was not in dispute, Tribunal erred on limitation and revenue neutrality, and penalty was imposable regardless of revenue neutrality. Assessee contended the appeal was barred under Section 35L, the primary issue of excisability was abandoned, and the issue of CENVAT credit on DEPB scrips was not raised before the Tribunal. Court's Analysis: The judgment text provided is incomplete, ending mid-paragraph during the court's consideration of maintainability. The court noted that excisability was specifically raised by the assessee before the original authority and a finding of manufacture was given. The details of the court's final analysis and decision are not available. Decision: Not mentioned (judgment text incomplete).
Headnote
Not mentioned (judgment text incomplete)
Issue of Consideration
Whether the appeal before the High Court is maintainable under Section 35G of the Central Excise Act, 1944 given that the order of the Tribunal involves determination of rate of duty; Whether the Tribunal was correct in setting aside the duty demand on the grounds of revenue neutrality and limitation without recording a finding on the applicability of a Larger Bench decision; Whether penalty is imposable even if the duty demand is revenue neutral; Whether CENVAT credit would apply when CVD is paid by debit of DEPB scrips.
Final Decision
Not mentioned (judgment text incomplete)
Law Points
- Legal points not extracted
Case Details
2026 LawText (MAD) (07) 31
Dr. Justice G. Jayachandran, Justice N. Mala
Mr. A.P. Srinivas (Appellant), M/s. L. Maithili (R1)
The Commissioner of Central Excise, Chennai II Commissionerate
M/s. Computer Graphics Limited and The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench
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Nature of Litigation
Civil Miscellaneous Appeal under Section 35G of Central Excise Act, 1944 against CESTAT's final order setting aside duty demand.
Remedy Sought
Appellant Revenue seeking to restore the original order confirming duty demand of Rs.20,37,33,174 with penalty and interest.
Filing Reason
CESTAT allowed the assessee's appeal on grounds of revenue neutrality and time-bar, reversing Commissioner's confirmation.
Previous Decisions
Original order by Commissioner of Central Excise dated 28.11.2006 confirming duty; CESTAT Final Order No.905/2007 dated 19.07.2007 setting aside the demand.
Issues
Whether the appeal is maintainable under Section 35G given the statutory bar under Section 35L concerning determination of rate of duty.
Whether the Tribunal was correct in setting aside the demand without recording a finding on the applicability of a Larger Bench decision of CESTAT and a Supreme Court judgment relied by the Appellant.
Whether the Tribunal was correct in holding the demand was barred by limitation despite alleged deliberate withholding of information.
Whether penalty is imposable for violation of rules even if the duty demand was revenue neutral.
Whether the question of CENVAT credit or revenue neutrality would apply when CVD was paid only by debit of DEPB scrips.
Submissions/Arguments
Appellant argued that excisability was not an issue as the original authority's finding on manufacture was left undisturbed; the Tribunal reversed only on the alternate plea of revenue neutrality, but the finding on limitation was erroneous due to deliberate withholding of information; the finding on revenue neutrality was unsustainable because CENVAT credit would not apply when CVD was paid through DEPB scrips and no evidence was produced; penalty and interest were imposable regardless of revenue neutrality.
Respondent argued that the appeal was not maintainable under Section 35L as the issue of excisability is intrinsically connected with the rate of duty; the Revenue gave up its primary case on merits, so the appeal should be dismissed; even the revenue neutrality issue does not survive; as per Foreign Trade Policy, from 2004-05 onwards CENVAT credit was allowed on DEPB scrips; the Revenue could not raise the issue for periods after 2004-05 as it was not disputed before the Tribunal.
Ratio Decidendi
Ratio not explicitly mentioned
Judgment Excerpts
The 1st respondent is a Public Limited Company incorporated under the Companies Act, 1956, and engaged inter alia in the conversion of Jumbo Rolls of Photographic Films into rolls of different sizes as per the customers’ specifications.
The original authority, namely, the Commissioner of Central Excise, Chennai-II, vide order dated 28.11.2006, rejected the 1 st respondent’s contentions and confirmed the entire amount of duty of Rs.20,37,33,174/- under Section 11A[2] of the Central Excise Act and imposed equal penalty under Section 11AC of the Central Excise Act.
The Tribunal, relying on the judgment of the Hon’ble Supreme Court, in Commissioner of Central Excise, & Customes, Vadodara Vs. Narmadha Chemataur Pharmaceuticals Limited [2005 (179) E.L.T. 276 (SC)], observed that during 2004-05 and afterwards, the 1st respondent was entitled to avail CENVAT credit of CVD paid during DEPB on the imported raw material and also to similar credit duty of excise paid on the indigenous raw material, that the demand was time barred and that the total amount on admissible credit exceeded the amount of duty demanded by the Commissioner for the period 2004-05 and 2005-06 resultantly set aside the entire demand by allowing the 1 st respondent’s appeal.
Procedural History
Show cause notice dated 29.08.2006 issued by Commissioner of Central Excise; reply dated 25.10.2006; Original order dated 28.11.2006 confirming demand; Appeal to CESTAT; CESTAT Final Order No.905/2007 dated 19.07.2007 setting aside demand; Revenue appeal to High Court under Section 35G of Central Excise Act, 1944; hearing on 30.06.2026 and judgment delivered on 23.07.2026 (text incomplete).
Acts & Sections
- Central Excise Act, 1944: 35G, 35L, 2(f)(iii), 11A(2), 11AC, 11AB
- Companies Act, 1956:
