CMA No. 507 of 2009 IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON: 30.06.2026 DELIVERED ON: 23.07.2026 CORAM THE HON'BLE DR JUSTICE G. JAYACHANDRAN AND THE HON'BLE MRS.JUSTICE N. MALA CMA No. 507 of 2009 and MP No.1 of 2009 The Commissioner of Central Excise, Chennai II Commissionerate, No.692, MHU Complex, Anna Salai, Nandanam, Chennai-600 035. ..Appellant(s) Vs 1. M/s.Computer Graphics Limited No.31/A9 & 10, Sidco Industrial Estate, Ambattur, Chennai-98. 2. The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe, 1st floor, No.26, Haddows Road, Chennai-600 006. ..Respondent(s) Civil Miscellaneous Appeal is filed under Section 35G of the Central Excise Act,1944, against the Final Order No.905/2007 dated 19/07/2007 in Appeal No.E/25/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai. For Appellant(s): Mr.A.P.Srinivas Standing Counsel For Respondent(s): M/s.L.Maithili for R1 Tribunal - R2 __________ Page1 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 JUDGMENT N.MALA, J. Facts leading to the Appeal:-

(1) 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 conversion, according to the 1st respondent, is effected by the process of cutting and slitting carried out on the jumbo rolls. The 1st respondent is also engaged in trading of imported ready to use unexposed photo colour film rolls packed in individual plastic canisters which are marketable as such. While so, a show cause notice dated 29.08.2006, was issued by the Commissioner of Central Excise, Chennai-II, seeking to treat the process of placing all imported ready to use unexposed colour film rolls packed in plastic canisters in printed cartons with brand name and MRP as a process of manufacture and a demand for Central Excise Duty, on the sale of the subject goods during the period from 01.03.2003 to 31.08.2004, was made. In the impugned show cause notice, the duty was demanded for the entire period along with interest and penalty by invoking the extended period of limitation. The 1st respondent submitted his reply to the show cause notice on 25.10.2006, submitting inter alia that the process undertaken by it, did __________ Page2 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

not amount to manufacture and that the duty demanded could not be sustained since the issue was completely revenue neutral. The 1st respondent further contended that the demand was not sustainable, since the extended period of limitation was not invocable in the facts of the case. The original authority, namely, the Commissioner of Central Excise, Chennai-II, vide order dated 28.11.2006, rejected the 1st 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 authority also imposed interest on duty under the provisions of 11AB of the Act. Aggrieved by the order of the Original Authority, the 1st respondent preferred an appeal before the Appellate Tribunal [CESTAT], raising several grounds including that the activity of the 1st respondent was purely a trading activity and not one of manufacture. The 1st respondent also raised a plea of revenue neutrality by submitting that, if the said goods are held to be dutiable, the 1st respondent would be entitled to the benefit of CENVAT credit on inputs. The 1st respondent contended that the total credit including credit of CVD paid for the imported film rolls and credit of excise duty paid on indigenously procured inputs would exceed the amount of the duty demanded in the impugned order. The 1st respondent also contended that a major portion of the duty demanded for the period from March 2003 to February 2006, in the show __________

Page3 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 cause notice dated 29.08.2006, was beyond the period of limitation. The 1st respondent further contended that the extended period of limitation was not invocable, since the clearance of the goods in question were made in a bona fide belief that the activity did not amount to manufacture. 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 1st respondent’s appeal. Aggrieved by the order of the Tribunal, the Revenue has preferred the above Civil Miscellaneous Appeal. Substantial Questions of Law and the Contentions of the Appellant:- (2) In the Civil Miscellaneous Appeal, the appellant raised the following substantial questions of law:- Whether in the facts and circumstances of the case, the 2nd respondent Tribunal was correct in, __________ Page4 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

(i) deciding the appeal without recording a finding on the applicability or otherwise of a Larger Bench decision of CESTAT and a judgment of the Hon’ble Supreme Court relied by the Appellant in the Adjudication Order; (ii) deciding the appeal relying on the Supreme Court judgment rendered in the case of M/s.Narmada Chemataur Pharmaceuticals where the facts are different; (iii) holding that the demand was barred by limitation of time when there was deliberate withholding of information and voluntary entry into Central Excise net from 01.03.2006; (iv) whether penalty is imposable for violation of rules, even if the demand for duty was revenue neutral; and (v) whether the question of Cenvat credit or revenue neutrality would apply when CVD is paid only by debit DEPB scrips. (3) The learned counsel for the appellant/Revenue submitted that the excisability of the subject goods was not an issue, since the categorical finding of the Original Authority, that the activity carried on by the 1st respondent amounted to manufacturing activity in terms of Section 2(f)

(iii) of the Central Excise Act, was left undisturbed by the tribunal. The learned counsel submitted that the Tribunal reversed the order of the Appellate Authority, only on the alternate plea of the 1st respondent that the demand of duty was unsustainable on account of revenue neutrality. The learned counsel further submitted that the finding of the Tribunal that the demand was barred by limitation was erroneous, in view of the deliberate withholding of information as to the manufacturing activity __________ Page5 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 carried on by the 1st respondent during the relevant period and its subsequent voluntary entry into the Central Excise net from 01.03.2006. The learned counsel submitted that the finding on revenue neutrality was unsustainable, since the Tribunal failed to note that there was no question of CENVAT credit, when the CVD was paid only on debit of DEPB scrips and for failure to produce the necessary evidence in support of such credit. The learned counsel finally submitted that assuming that the demand for duty was revenue neutral, even otherwise, the Revenue was entitled to impose penalty and interest for violation of rules. Response by the 1 st Respondent:-

(4) The learned counsel for the 1st respondent, apart from addressing counter arguments, also filed written submissions. The learned counsel for the 1st respondent admitted that the only ground of challenge was that the issue could not be treated as revenue neutral, since the customs duty and additional duty were paid on debiting of DEPB scrips and hence, ineligible for CENVAT credit. The learned counsel further submitted that the question of limitation and revenue neutrality would be relevant, only if the subject goods are held to be emerging from process of manufacture and since the Revenue gave up the primary case on merits, the appeal was liable to be dismissed in limini. (5) The learned counsel for the 1st respondent submitted that the appeal is not maintainable as there is a statutory bar against filing an appeal before this __________ Page6 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

Court where the order of Tribunal under challenge, involves a question of, among other things, determination of Rate of Duty. The learned counsel relied on Section 35G(l) and 35[L] of the Central Excise Act, in support of the said contention. The learned counsel submitted that the issue of the excisability of the goods is intrinsically connected with the Rate of Duty for the purpose of assessment and therefore as per judgment of the Hon’ble Supreme Court in a. Alupro Building Systems Pvt. Ltd. Versus Commissioner of Central Excise, Bangalore – II (2026) 42 Centax 456 (SC) [27-05-2026]; b. Commr. of S.T. Kolkata versus Calcutta Industrial Supply Corporation – 2018 (19) GSTL 444 (Cal.) [04-10-2018]; c. Commissioner of C. Ex., Pondicherry versus CESTAT, Chennai – 2016 (340) ELT 53 (Mad.) [13-06-2016], the appeal before this Court is not maintainable. The learned counsel submitted that even the issue of revenue neutrality which is raised as an alternate plea, is related to the levy of duty on the final product, a sin qua non for availment of CENVAT credit. The learned counsel submitted that since the Revenue gave up its primary issue relating to excisability of the subject goods, the allied issue of revenue neutrality does not survive for consideration in the appeal. The learned counsel further submitted that as per the Foreign Trade Policy of 2004-05, the additional duty of debit in DEPB scrips was eligible for CENVAT credit and same was continued in Foreign Trade Policy in 2005-06. The learned counsel submitted that as __________

Page7 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 per Foreign Trade Policy of 2003-04, the CENVAT credit, by adjustment of DEPB scrips was not permitted for the period prior to 2003, only. The learned counsel submitted that it is not open to the Revenue to raise an issue with regard to revenue neutrality for the period after 2004-05, since it was not disputed before the Tribunal. Findings:- (6) We have heard both the learned counsels and perused the materials placed on record. Maintainability: (7) The main contention of the learned counsel for the 1st respondent is that the appeal is not maintainable in view of the revenue's plea that the issue of excisability of the subject goods was not raised by it. According to the learned counsel the issue of excisability of goods is intrinsically connected with the Rate of Duty for the purpose of assessment and in view of the statutory bar on filing an appeal before this Court under Section 35G(l) and 35[L] of the Central Excise Act, 1944, the appeal is not maintainable. In support of the said submission, the learned counsel relied on the following judgments: a. Alupro Building Systems Pvt. Ltd. Versus Commissioner of Central Excise, Bangalore – II (2026) 42 Centax 456 (SC) [27-05-2026]; b. Commr. of S.T. Kolkata versus Calcutta Industrial Supply Corporation – 2018 (19) GSTL 444 (Cal.) [04-10-2018]; __________ Page8 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

c. Commissioner of C. Ex., Pondicherry versus CESTAT, Chennai – 2016 (340) ELT 53 (Mad.) [13-06-2016]

(8) Upon a perusal of the materials on record, we find that the issue of excisability of the subject goods was specifically raised by the 1st respondent itself, before the Original Authority. The Original Authority gave a specific finding that the goods were excisable, since the activity of the 1st respondent amounted to manufacture as contemplated under Clause [iii] of Section 2(f) of the Act. It was the 1st respondent who raised the alternate plea of revenue neutrality, and even the said plea was rejected by the Original Authority on the ground that the 1st respondent was not entitled to avail the benefit of MODVAT since the payment was made through DEPB scrips. The Original Authority further found that the extended period of limitation was applicable, since there was suppression of facts with an intention to evade payment of duty and further, the 1st respondent had not made serious resistance or challenge to the same. The Original Authority rejected the feeble attempt of the 1st respondent to attribute the Department with knowledge of its trading activities on the ground that it was a hollow statement made without any material. The plea of bona fide belief was also rejected on the ground that the law governing the definition of “manufacture” as contained in Section 2(f)(iii) remained unchanged and further the records revealed that with effect from 01.03.2006, the 1st respondent voluntarily __________ Page9 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

commenced the payment of duty on the subject goods. On the issue of penalty, the Original Authority found that there was gross violation of Rules 4, 6, 8, 10, 11 and 12 of the Central Excise Act, 2002, and that the 1st respondent by its positive acts, had evaded excise duty, contravening the provisions of the Act and Rules and hence, held it liable for deterrent penalty in terms of the proviso to Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002. The 1st respondent filed appeal against the order of the Original Authority raising several grounds, including that none of the requirements of Section 2(f)(iii) were satisfied with regard to the trading activity carried out by it and therefore the activity carried out by it was erroneously construed as “manufacture” and alternately pleaded the issue of revenue neutrality. (9) Having raised the issue of “manufacture” and “excisability” of the subject goods, in its grounds of appeal before the Tribunal, for the reasons best known to it, the 1st respondent did not address the primary issue of ‘’manufacture’’ and ‘’excisability’’, but confined its submissions to the alternate plea of revenue neutrality.

(10) It is, therefore, evident that the 1st respondent accepted the finding of the Original Authority on the issue of manufacture. This is apparent from the fact that, before the Tribunal, it consciously confined its challenge to the question of revenue neutrality and did not assail the findings of the Original Authority on ‘manufacture’ and ‘excisability’. Obviously, __________ Page10 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 knowing well that the treatment of the goods imported falls within the definition of ‘manufacture’, hence, excisable. Further, the plea of revenue neutrality could have arisen only on the premise that the subject goods were excisable. Consequently, the findings of the Original Authority on manufacture and excisability, having remained unchallenged, attained finality. In that view of the matter, the revenue is justified in contending before this Court that the excisability of the goods is no longer an issue. In the facts and circumstances of the case, we find that the judgments relied on by the learned counsel for the respondent's are not applicable. Under the circumstances, we find no merit in the contention of the learned counsel for the appellant that the appeal is not maintainable in view of the provisions of Section 35(g)(1) and 35(l) of the Central Excise Act, 1944. Revenue Neutrality:

(11) The only issue that survives is admittedly the plea of revenue neutrality. The learned counsel for the Revenue submitted that the 1st respondent is not entitled to CENVAT credit, since the CVD was paid only by debit of DEPB scrips and not in cash. The learned counsel, in support of the said contention, relied on the judgment of the Division Bench of this Court in the case of Mohan Breweries & Distilleries Ltd. Versus Commr. Of C.Ex., Pondicherry, reported in 2015 (325) E.L.T. 42 (Mad.). The learned counsel submitted that in view of the decision of the Larger __________ Page11 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 Bench in the case of M/s.ESSAR Steels Limited Vs. Commissioner of Central Excise, Vishakhapatnam, reported in 2004 SCC OnLine CESTAT 2331 : 2004 [173] ELT 239 [LB], CENVAT credit could not be availed for CVD paid on imported goods debited to DEPB scrips upto 31.08.2004 and that, even thereafter the quantum of credit available is not precisely known to conclude whether the credit available was sufficient to cover the duty due. The learned counsel therefore submitted that on the facts of the case, the plea of revenue neutrality was unsustainable.

(12) Countering the learned counsel for the appellant, the learned counsel for the 1st respondent submitted that the judgment in Mohan Breweries and Distilleries case, was not applicable to the facts of the present case as it pertains to a period prior to EXIM policy. The learned counsel further submitted that the Foreign Trade Policy of 2003-04 specifically deleted the clause pertaining to non-availment of CENVAT credit by adjustment in DEPB scrips prior to 2003 and that the Foreign Trade Policy of 2004-05, in order to bring clarity, specifically provided that additional duty debited in DEPB scrips is available for availment of CENVAT scrips and the same was continued in the Foreign Trade Policy of 2005-06. The learned counsel further submitted that it was not open to the Revenue to raise an issue with regard to revenue neutrality for the period after 2004-05 not having disputed the same before the Tribunal and therefore, the order passed by the Tribunal is legally sustainable. __________ Page12 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 (13) We have bestowed our anxious consideration to the rival submissions of the learned counsels.

(14) In the grounds of appeal in the Civil Miscellaneous Appeal, in Ground [g] and [h], the appellant has stated as follows:-‘’[g]The decision of the Larger Bench rendered in the case of M/s.ESSAR Steels Limited made it clear that at the relevant point of time [till 31.08.2004], cenvat credit could not be availed on CVD paid on imported goods debited through DEPB scrips ; [h]Therefore, there is no question of availing credit of CVD paid on imported film rolls for purpose of discharging central excise duty liability at least upto 31.08.2004. Consequently, the judgment of the Hon’ble Supreme Court rendered in the case of M/s.Narmada Chemataur Pharmaceuticals would not apply to the facts of this case, CESTAT did not even consider the Larger Bench decision of CESTAT in the case of M/s.ESSAR Streels Limited though appellant cited the same in the Adjudication Order.’’ (15) From the aforesaid grounds raised, it is clear that the appellant’s stand is that at least upto 31.08.2004, the 1st respondent was not entitled for CVD credit paid through DEPB scrips on imported film rolls for the purpose of discharging central excise duty liability. It is the contention of the appellant that for the subsequent period, there is no material to quantify the available credit so as to set it off against the duty payable by the 1st __________ Page13 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

respondent. The 1st respondent, on the other hand contends that in view of the concession on behalf of the Revenue with regard to limitation, the period of dispute stands confined to 2004-05 and 2005-06. We do not understand on what basis the 1st respondent contends that the Revenue/appellant conceded with regard to the limitation for the prior period, i.e., 2003-04. (16) We find that the impugned order in so far as it relates to the revenue neutrality is palpably perverse. The Tribunal has not given any independent finding, on revenue neutrality for the period upto 31.08.2004, for which period the 1st respondent was admittedly not entitled to CVD paid on imported goods debited through DEPB scrips except for stating that it was time barred. The finding of the Tribunal on revenue neutrality is as follows: “In the present case, it is not in dispute that, during 2004-05 and afterwards, the appellants were entitled to avail CENVAT credit of CVD paid through DEPB on the imported raw material. Similar credit of duty of excise paid on indigenous raw material also was, of course, available to them. For the prior period, the demand is evidently hit by time-bar for the reasons stated by learned counsel.” The Tribunal has failed to note that for the period upto 31.08.2004, the judgment of this Court in Mohan Breweries and Distilleries Limited case, squarely applies. __________ Page14 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

(17) The issue before the Division Bench of this Court in the Mohan Breweries’ case was whether CENVAT credit could be availed, if the same was paid upon debit entry in passbook entry in DEPB scheme and without paying it in cash. (18) The Division Bench after referring to EXIM Policy as also the notifications connected therewith, held as follows: “14.But as pointed out by the learned Standing Counsel for the Revenue, DEPB Scheme was actually introduced in the EXIM Policy, to neutralize the incidence of customs duty on import content of export products. The credit itself is available against exports products. What is refundable under Rule 5 of the Cenvat Credit Rules, 2002, is actually of ‘’such amount’’ and hence the same can be relatable only to the payment. 15.Though the appellant claimed to have availed the benefit of exemption under Notification No.34/97, and cleared the goods by debiting DEPB, for both customs duty as well as additional customs duty, it is claimed by the respondents that under the relevant Bill of Entry bearing No.45901, dated 25.01.2003, they availed the benefit of exemption Notification No.45/2002, dated 22.04.2002. The Notification No.34/97, dated 07.04.1997 relates to EXIM Policy April, 97-March, 2002. But the Notification No.45/2002 pertains to EXIM Policy April, 2002-March, 2007.

16.According to the respondents, when the Bill of Entry dated 25.01.2003, which is the relevant document specified in Rule 7 of the Cenvat Credit Rules, 2002, did not indicate payment of any duty, no Cenvat Credit can be availed. Therefore, we do not think that the Tribunal committed any mistake in law. __________ Page15 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 17.Under the Exemption Notifications, if the importers produced DEPB scrip and availed the exemption for clearance of goods, the goods become non-duty paid goods. The value of DEPB scrip, once used, gets extinguished and hence there would be no question of seeking Cenvat credit thereafter. 18.In Commissioner of Central Excise V. Precision Pipes [2014 [302] E.L.T. 184], the Allahabad High Court held that as per para 4.3.5 of the Exim Policy, it was only when the additional customs duty was paid in cash on inputs under DEPB that it could be adjusted against the Cenvat credit or Duty Drawback. 19.As we have indicated earlier, the Commissioner (Appeals) as well as the Tribunal relied upon a Larger Bench decision of the CESTAT in ESSAR Steel Limited V. Commissioner [2004 (173) E.L.T 239]. The said decision is not overruled so far by any High Court. But according to the learned counsel for the appellant, the decision of the Larger Bench was watered down to a great extent by this Court in Commissioner of Central Excise v. Spci Limited [2014 (305) E.L.T. 484].

20.But a careful look at the decision in Spic would show that the case related to imports made prior to the year 2000. In paragraph 16 of the decision in Spic, the Court pointed out as follows:- ‘’16.It is no doubt true that under the Scheme available from 1.4.2000, there is a specific prohibition that wherever the additional customs duty is adjusted from DEPB, the assessee would not be entitled to Cenvat/Drawback. However, in the absence of any such specific prohibition for the period prior to 2000, considering the provision under Paragraph 7.25 that a holder of DEPB shall have the option to pay additional customs duty if any, in cash, the provision under Paragraph 7.41 could only be read as recognizing payment in cash too available for adjustment under Modvat Scheme. Thus, in the absence of any restrictive wording, we do no find __________ Page16 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 any justification to deny the benefit of Modvat credit available to a case covered by the credit taken under the Passbook Scheme.’’

21.Therefore, after a specific prohibition was introduced under the Scheme from 1.4.200 onwards, it is not possible for the appellant to claim the benefit in respect of the Bill of Entry of the year 2003. Therefore, the decision in Spic, even if it is taken to water down the decision of the Larger Bench in ESSAR Steel Limited, does so only in respect of the period prior to 2000. Therefore, the decision of this Court in Spic is not favourable to the appellant.” (19) From the above judgment, it is clear that for the period upto 31.08.2004, unless the duty was paid in cash, the CENVAT credit was not available since mere payment by debit in the DEPB scrips was of no avail. Assuming that the CENVAT credit for duty debited in DEPB scrips was available, in view of the categorical finding of the Division Bench that the value of DEPB scrip, once used, gets extinguished and there would be no question of seeking CENVAT credit thereafter, squarely applies and therefore the contention of the learned counsel for the 1st respondent cannot be sustained. (20) For the period subsequent to 31.08.2004, in view of the change in Foreign Trade Policy, the CENVAT credit was available for adjustments made in the DEPB scrips. The finding of the Tribunal for the period 2004-05, reads as follows: “There can be no doubt that the total amount of admissible credit would exceed the amount of duty __________ Page17 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

demanded by the Commissioner for 2004-05 and 05- 06. In the result, the entire demand is liable to be set aside and the appeal be allowed. It is ordered accordingly.” From the aforesaid finding, it is seen that the Tribunal without any basis, cryptically held that the total amount on the admissible credit exceeded the amount of duty demanded by the Commissioner for the period 2004-05 and 2005-06. We are of the view that perversity is writ large in the said finding of the Tribunal as it has failed to substantiate on what basis or material it arrived at the finding. The plea of revenue neutrality could not have been accepted in the absence of a factual determination by the Tribunal, based on the materials on record, as to the quantum of CENVAT credit available to the assessee, only upon recording such a finding the Tribunal could have legitimately concluded that the situation was revenue neutral. (21) The Tribunal ought to have further seen that it is the 1st respondent who pleaded revenue neutrality, ergo, the burden was heavy on the 1st respondent to place the supporting materials before the authorities to establish that the CENVAT credit of CVD paid through DEPB scrips was equal to or exceeded the amount of duty demanded by the Commissioner for the period 2004-05 and 2005-06. We, therefore accept the contention of the learned counsel for the appellant that Tribunal's finding on revenue neutrality is untenable and liable to be set aside. __________ Page18 of 25

https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 Limitation: (22) In so far as applicability of the extended period of limitation is concerned, we find that the Appellate Authority has dealt with the same in a very Cavalier fashion. The Tribunal on the issue of limitation held as follows: “For the prior period, the demand is evidently hit by time-bar for the reasons stated by learned counsel.” (23) The said finding is patently unreasonable. On consideration of the entire materials and after elaborate discussion of each of the aspects of Section 11A, the Original Authority, held as follows: “When the whole case is considered dispassionately, it is well evident that CGL had made serious attempts to make mockery of settled laws and concealed their activities from the knowledge of the Department in pursuit of profit motive at the cost of Government Revenue. In these circumstances, the principles set out by the Hon’ble Supreme Court to demand duty under extended proviso to Section 11A[1] being fully present, invocation of the same in this case is well justified.”

(24) In the absence of any justifiable reasons to overturn the said finding of the Original Authority by the Tribunal, and in view of the finding of fact rendered by the Original Authority, that there was deliberate suppression of facts with an intention to evade payment of duty and that the plea of bona fide belief was also not made out, we are of the view that Section 11A was rightly invoked by the Revenue/appellant. Therefore, the finding of the Tribunal on application of extended period of limitation for the period prior to 31.08.2004 is concerned is set aside as illogical and unreasonable. __________ Page19 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 Penalty and Interest: (25) On the issue of penalty and interest, we find that the Original Authority after considering the statements of the 1st respondent’s officials and on appreciation of the materials on record found that the 1st respondent had by its positive activities with a view to evade the payment of excise duty contravened the provisions of Rules 4, 6, 8, 10, 11 and 12 of the Central Excise Rules 2002 and therefore, imposed deterrent penalty in terms of Section 11AC read with Rule 28 of the Central Excise Rules, 2002 and interest under Section 11AB of the Act. In our view, the findings of fact call for no interference, since we find no perversity in such finding. (26) In view of the above discussions, the substantial questions of law framed are answered in favour of the Revenue.

(27) Accordingly, this Civil Miscellaneous Appeal is allowed and the Final Order No.905/2007 dated 19/07/2007 in Appeal No.E/25/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, is confirmed. No costs. Consequently, the connected miscellaneous petition is closed. (G.J.,J.) (N.M.,J.) 23.07.2026 Index: Yes Speaking/Non-speaking order Neutral Citation: Yes/No dsn/AP __________ Page20 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 To 1.M/s.Computer Graphics Ltd 31/A9 & 10, Sidco Industrial Estate, Ambattur, Chennai-98. 2.The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe, 1st Floor, No. 26, Haddows Road, Chennai-600 006. __________ Page21 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 DR.G.JAYACHANDRAN J. and N.MALA J. dsn/AP Judgment in CMA No. 507 of 2009 Delivered on 23.07.2026 __________ Page22 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27-07-2026 CORAM THE HON'BLE DR JUSTICE G. JAYACHANDRAN AND THE HON'BLE MRS.JUSTICE N. MALA CMA No. 507 of 2009 The Commissioner Of Central Excise, Chennai Ii Commissionerate, 692, Mhu Complex, Anna Salai, Nandanam, Chennai-35. ..Appellant(s) Vs 3. M/s.Computer Graphics Ltd 31/a9&10, Sidco Industrial Estate, Ambattur, Chennai-98. 4. The Customs

Excise And Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe I Floor, 26, Haddows Road, Chennai-6. ..Respondent(s) CMA No. 507 of 2009 For Appellant(s): M/s.A.P.Srinivas, Standing counsel For Respondent(s): R2 - Tribunal M/s.L.Maithili For R1 Order (Order of the Court was made by Dr.G.Jayachandran J.) Today, the above matter is listed under the caption ‘’For Being Mentioned’’ at the instance of the learned Standing counsel for the appellant. __________ Page23 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 2.The learned Standing counsel for the appellant submitted that this Court had allowed the above Civil Miscellaneous Appeal filed by the appellant, vide judgment dated 23.07.2026. However, in the last paragraph of the judgment, namely, paragraph No.27, instead of setting aside the Final Order No.905/2007 dated 19/07/2007 in Appeal No.E/25/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, it has been wrongly mentioned as ‘’confirmed’’. Hence, the learned Standing counsel prays for appropriate orders.

3.It is seen that due to inadvertence, in paragraph No.27 of the judgment dated 23.07.2026, instead of mentioning the Final Order No.905/2007 dated 19/07/2007 in Appeal No.E/25/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, as ‘’set aside and reversed’’, it has been wrongly typed as ‘’confirmed’’ 4.Hence, this Court directs the Registry to delete the word ‘’confirmed’’ in paragraph No.27 and replace the same as ‘’set aside and reversed’’ and issue fresh judgment copy forthwith. (G.J.,J.) (N.M.,J.) 27-07-2026 AP Internet: Yes To 1. M/s.Computer Graphics Ltd 31/a9&10, Sidco Industrial Estate, Ambattur, Chennai-98. 2. The Customs Excise And Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe I Floor, 26, Haddows Road, Chennai-6. __________ Page24 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 DR.G.JAYACHANDRAN J. AND N.MALA J. AP CMA No. 507 of 2009 27-07-2026 __________ Page25 of 25 https://www.mhc.tn.gov.in/judis

CMA No. 507 of 2009 IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON: 30.06.2026 DELIVERED ON: 23.07.2026 CORAM THE HON'BLE DR JUSTICE G. JAYACHANDRAN AND THE HON'BLE MRS.JUSTICE N. MALA CMA No. 507 of 2009 and MP No.1 of 2009 The Commissioner of Central Excise, Chennai II Commissionerate, No.692, MHU Complex, Anna Salai, Nandanam, Chennai-600 035. ..Appellant(s) Vs 1. M/s.Computer Graphics Limited No.31/A9 & 10, Sidco Industrial Estate, Ambattur, Chennai-98. 2. The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe, 1st floor, No.26, Haddows Road, Chennai-600 006. ..Respondent(s) Civil Miscellaneous Appeal is filed under Section 35G of the Central Excise Act,1944, against the Final Order No.905/2007 dated 19/07/2007 in Appeal No.E/25/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai. For Appellant(s): Mr.A.P.Srinivas Standing Counsel For Respondent(s): M/s.L.Maithili for R1 Tribunal - R2 __________ Page1 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 JUDGMENT N.MALA, J. Facts leading to the Appeal:-

(1) 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 conversion, according to the 1st respondent, is effected by the process of cutting and slitting carried out on the jumbo rolls. The 1st respondent is also engaged in trading of imported ready to use unexposed photo colour film rolls packed in individual plastic canisters which are marketable as such. While so, a show cause notice dated 29.08.2006, was issued by the Commissioner of Central Excise, Chennai-II, seeking to treat the process of placing all imported ready to use unexposed colour film rolls packed in plastic canisters in printed cartons with brand name and MRP as a process of manufacture and a demand for Central Excise Duty, on the sale of the subject goods during the period from 01.03.2003 to 31.08.2004, was made. In the impugned show cause notice, the duty was demanded for the entire period along with interest and penalty by invoking the extended period of limitation. The 1st respondent submitted his reply to the show cause notice on 25.10.2006, submitting inter alia that the process undertaken by it, did __________ Page2 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

not amount to manufacture and that the duty demanded could not be sustained since the issue was completely revenue neutral. The 1st respondent further contended that the demand was not sustainable, since the extended period of limitation was not invocable in the facts of the case. The original authority, namely, the Commissioner of Central Excise, Chennai-II, vide order dated 28.11.2006, rejected the 1st 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 authority also imposed interest on duty under the provisions of 11AB of the Act. Aggrieved by the order of the Original Authority, the 1st respondent preferred an appeal before the Appellate Tribunal [CESTAT], raising several grounds including that the activity of the 1st respondent was purely a trading activity and not one of manufacture. The 1st respondent also raised a plea of revenue neutrality by submitting that, if the said goods are held to be dutiable, the 1st respondent would be entitled to the benefit of CENVAT credit on inputs. The 1st respondent contended that the total credit including credit of CVD paid for the imported film rolls and credit of excise duty paid on indigenously procured inputs would exceed the amount of the duty demanded in the impugned order. The 1st respondent also contended that a major portion of the duty demanded for the period from March 2003 to February 2006, in the show __________

Page3 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 cause notice dated 29.08.2006, was beyond the period of limitation. The 1st respondent further contended that the extended period of limitation was not invocable, since the clearance of the goods in question were made in a bona fide belief that the activity did not amount to manufacture. 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 1st respondent’s appeal. Aggrieved by the order of the Tribunal, the Revenue has preferred the above Civil Miscellaneous Appeal. Substantial Questions of Law and the Contentions of the Appellant:- (2) In the Civil Miscellaneous Appeal, the appellant raised the following substantial questions of law:- Whether in the facts and circumstances of the case, the 2nd respondent Tribunal was correct in, __________ Page4 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

(i) deciding the appeal without recording a finding on the applicability or otherwise of a Larger Bench decision of CESTAT and a judgment of the Hon’ble Supreme Court relied by the Appellant in the Adjudication Order; (ii) deciding the appeal relying on the Supreme Court judgment rendered in the case of M/s.Narmada Chemataur Pharmaceuticals where the facts are different; (iii) holding that the demand was barred by limitation of time when there was deliberate withholding of information and voluntary entry into Central Excise net from 01.03.2006; (iv) whether penalty is imposable for violation of rules, even if the demand for duty was revenue neutral; and (v) whether the question of Cenvat credit or revenue neutrality would apply when CVD is paid only by debit DEPB scrips. (3) The learned counsel for the appellant/Revenue submitted that the excisability of the subject goods was not an issue, since the categorical finding of the Original Authority, that the activity carried on by the 1st respondent amounted to manufacturing activity in terms of Section 2(f)

(iii) of the Central Excise Act, was left undisturbed by the tribunal. The learned counsel submitted that the Tribunal reversed the order of the Appellate Authority, only on the alternate plea of the 1st respondent that the demand of duty was unsustainable on account of revenue neutrality. The learned counsel further submitted that the finding of the Tribunal that the demand was barred by limitation was erroneous, in view of the deliberate withholding of information as to the manufacturing activity __________ Page5 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 carried on by the 1st respondent during the relevant period and its subsequent voluntary entry into the Central Excise net from 01.03.2006. The learned counsel submitted that the finding on revenue neutrality was unsustainable, since the Tribunal failed to note that there was no question of CENVAT credit, when the CVD was paid only on debit of DEPB scrips and for failure to produce the necessary evidence in support of such credit. The learned counsel finally submitted that assuming that the demand for duty was revenue neutral, even otherwise, the Revenue was entitled to impose penalty and interest for violation of rules. Response by the 1 st Respondent:-

(4) The learned counsel for the 1st respondent, apart from addressing counter arguments, also filed written submissions. The learned counsel for the 1st respondent admitted that the only ground of challenge was that the issue could not be treated as revenue neutral, since the customs duty and additional duty were paid on debiting of DEPB scrips and hence, ineligible for CENVAT credit. The learned counsel further submitted that the question of limitation and revenue neutrality would be relevant, only if the subject goods are held to be emerging from process of manufacture and since the Revenue gave up the primary case on merits, the appeal was liable to be dismissed in limini. (5) The learned counsel for the 1st respondent submitted that the appeal is not maintainable as there is a statutory bar against filing an appeal before this __________ Page6 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

Court where the order of Tribunal under challenge, involves a question of, among other things, determination of Rate of Duty. The learned counsel relied on Section 35G(l) and 35[L] of the Central Excise Act, in support of the said contention. The learned counsel submitted that the issue of the excisability of the goods is intrinsically connected with the Rate of Duty for the purpose of assessment and therefore as per judgment of the Hon’ble Supreme Court in a. Alupro Building Systems Pvt. Ltd. Versus Commissioner of Central Excise, Bangalore – II (2026) 42 Centax 456 (SC) [27-05-2026]; b. Commr. of S.T. Kolkata versus Calcutta Industrial Supply Corporation – 2018 (19) GSTL 444 (Cal.) [04-10-2018]; c. Commissioner of C. Ex., Pondicherry versus CESTAT, Chennai – 2016 (340) ELT 53 (Mad.) [13-06-2016], the appeal before this Court is not maintainable. The learned counsel submitted that even the issue of revenue neutrality which is raised as an alternate plea, is related to the levy of duty on the final product, a sin qua non for availment of CENVAT credit. The learned counsel submitted that since the Revenue gave up its primary issue relating to excisability of the subject goods, the allied issue of revenue neutrality does not survive for consideration in the appeal. The learned counsel further submitted that as per the Foreign Trade Policy of 2004-05, the additional duty of debit in DEPB scrips was eligible for CENVAT credit and same was continued in Foreign Trade Policy in 2005-06. The learned counsel submitted that as __________

Page7 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 per Foreign Trade Policy of 2003-04, the CENVAT credit, by adjustment of DEPB scrips was not permitted for the period prior to 2003, only. The learned counsel submitted that it is not open to the Revenue to raise an issue with regard to revenue neutrality for the period after 2004-05, since it was not disputed before the Tribunal. Findings:- (6) We have heard both the learned counsels and perused the materials placed on record. Maintainability: (7) The main contention of the learned counsel for the 1st respondent is that the appeal is not maintainable in view of the revenue's plea that the issue of excisability of the subject goods was not raised by it. According to the learned counsel the issue of excisability of goods is intrinsically connected with the Rate of Duty for the purpose of assessment and in view of the statutory bar on filing an appeal before this Court under Section 35G(l) and 35[L] of the Central Excise Act, 1944, the appeal is not maintainable. In support of the said submission, the learned counsel relied on the following judgments: a. Alupro Building Systems Pvt. Ltd. Versus Commissioner of Central Excise, Bangalore – II (2026) 42 Centax 456 (SC) [27-05-2026]; b. Commr. of S.T. Kolkata versus Calcutta Industrial Supply Corporation – 2018 (19) GSTL 444 (Cal.) [04-10-2018]; __________ Page8 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

c. Commissioner of C. Ex., Pondicherry versus CESTAT, Chennai – 2016 (340) ELT 53 (Mad.) [13-06-2016]

(8) Upon a perusal of the materials on record, we find that the issue of excisability of the subject goods was specifically raised by the 1st respondent itself, before the Original Authority. The Original Authority gave a specific finding that the goods were excisable, since the activity of the 1st respondent amounted to manufacture as contemplated under Clause [iii] of Section 2(f) of the Act. It was the 1st respondent who raised the alternate plea of revenue neutrality, and even the said plea was rejected by the Original Authority on the ground that the 1st respondent was not entitled to avail the benefit of MODVAT since the payment was made through DEPB scrips. The Original Authority further found that the extended period of limitation was applicable, since there was suppression of facts with an intention to evade payment of duty and further, the 1st respondent had not made serious resistance or challenge to the same. The Original Authority rejected the feeble attempt of the 1st respondent to attribute the Department with knowledge of its trading activities on the ground that it was a hollow statement made without any material. The plea of bona fide belief was also rejected on the ground that the law governing the definition of “manufacture” as contained in Section 2(f)(iii) remained unchanged and further the records revealed that with effect from 01.03.2006, the 1st respondent voluntarily __________ Page9 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

commenced the payment of duty on the subject goods. On the issue of penalty, the Original Authority found that there was gross violation of Rules 4, 6, 8, 10, 11 and 12 of the Central Excise Act, 2002, and that the 1st respondent by its positive acts, had evaded excise duty, contravening the provisions of the Act and Rules and hence, held it liable for deterrent penalty in terms of the proviso to Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002. The 1st respondent filed appeal against the order of the Original Authority raising several grounds, including that none of the requirements of Section 2(f)(iii) were satisfied with regard to the trading activity carried out by it and therefore the activity carried out by it was erroneously construed as “manufacture” and alternately pleaded the issue of revenue neutrality. (9) Having raised the issue of “manufacture” and “excisability” of the subject goods, in its grounds of appeal before the Tribunal, for the reasons best known to it, the 1st respondent did not address the primary issue of ‘’manufacture’’ and ‘’excisability’’, but confined its submissions to the alternate plea of revenue neutrality.

(10) It is, therefore, evident that the 1st respondent accepted the finding of the Original Authority on the issue of manufacture. This is apparent from the fact that, before the Tribunal, it consciously confined its challenge to the question of revenue neutrality and did not assail the findings of the Original Authority on ‘manufacture’ and ‘excisability’. Obviously, __________ Page10 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 knowing well that the treatment of the goods imported falls within the definition of ‘manufacture’, hence, excisable. Further, the plea of revenue neutrality could have arisen only on the premise that the subject goods were excisable. Consequently, the findings of the Original Authority on manufacture and excisability, having remained unchallenged, attained finality. In that view of the matter, the revenue is justified in contending before this Court that the excisability of the goods is no longer an issue. In the facts and circumstances of the case, we find that the judgments relied on by the learned counsel for the respondent's are not applicable. Under the circumstances, we find no merit in the contention of the learned counsel for the appellant that the appeal is not maintainable in view of the provisions of Section 35(g)(1) and 35(l) of the Central Excise Act, 1944. Revenue Neutrality:

(11) The only issue that survives is admittedly the plea of revenue neutrality. The learned counsel for the Revenue submitted that the 1st respondent is not entitled to CENVAT credit, since the CVD was paid only by debit of DEPB scrips and not in cash. The learned counsel, in support of the said contention, relied on the judgment of the Division Bench of this Court in the case of Mohan Breweries & Distilleries Ltd. Versus Commr. Of C.Ex., Pondicherry, reported in 2015 (325) E.L.T. 42 (Mad.). The learned counsel submitted that in view of the decision of the Larger __________ Page11 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 Bench in the case of M/s.ESSAR Steels Limited Vs. Commissioner of Central Excise, Vishakhapatnam, reported in 2004 SCC OnLine CESTAT 2331 : 2004 [173] ELT 239 [LB], CENVAT credit could not be availed for CVD paid on imported goods debited to DEPB scrips upto 31.08.2004 and that, even thereafter the quantum of credit available is not precisely known to conclude whether the credit available was sufficient to cover the duty due. The learned counsel therefore submitted that on the facts of the case, the plea of revenue neutrality was unsustainable.

(12) Countering the learned counsel for the appellant, the learned counsel for the 1st respondent submitted that the judgment in Mohan Breweries and Distilleries case, was not applicable to the facts of the present case as it pertains to a period prior to EXIM policy. The learned counsel further submitted that the Foreign Trade Policy of 2003-04 specifically deleted the clause pertaining to non-availment of CENVAT credit by adjustment in DEPB scrips prior to 2003 and that the Foreign Trade Policy of 2004-05, in order to bring clarity, specifically provided that additional duty debited in DEPB scrips is available for availment of CENVAT scrips and the same was continued in the Foreign Trade Policy of 2005-06. The learned counsel further submitted that it was not open to the Revenue to raise an issue with regard to revenue neutrality for the period after 2004-05 not having disputed the same before the Tribunal and therefore, the order passed by the Tribunal is legally sustainable. __________ Page12 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 (13) We have bestowed our anxious consideration to the rival submissions of the learned counsels.

(14) In the grounds of appeal in the Civil Miscellaneous Appeal, in Ground [g] and [h], the appellant has stated as follows:-‘’[g]The decision of the Larger Bench rendered in the case of M/s.ESSAR Steels Limited made it clear that at the relevant point of time [till 31.08.2004], cenvat credit could not be availed on CVD paid on imported goods debited through DEPB scrips ; [h]Therefore, there is no question of availing credit of CVD paid on imported film rolls for purpose of discharging central excise duty liability at least upto 31.08.2004. Consequently, the judgment of the Hon’ble Supreme Court rendered in the case of M/s.Narmada Chemataur Pharmaceuticals would not apply to the facts of this case, CESTAT did not even consider the Larger Bench decision of CESTAT in the case of M/s.ESSAR Streels Limited though appellant cited the same in the Adjudication Order.’’ (15) From the aforesaid grounds raised, it is clear that the appellant’s stand is that at least upto 31.08.2004, the 1st respondent was not entitled for CVD credit paid through DEPB scrips on imported film rolls for the purpose of discharging central excise duty liability. It is the contention of the appellant that for the subsequent period, there is no material to quantify the available credit so as to set it off against the duty payable by the 1st __________ Page13 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

respondent. The 1st respondent, on the other hand contends that in view of the concession on behalf of the Revenue with regard to limitation, the period of dispute stands confined to 2004-05 and 2005-06. We do not understand on what basis the 1st respondent contends that the Revenue/appellant conceded with regard to the limitation for the prior period, i.e., 2003-04. (16) We find that the impugned order in so far as it relates to the revenue neutrality is palpably perverse. The Tribunal has not given any independent finding, on revenue neutrality for the period upto 31.08.2004, for which period the 1st respondent was admittedly not entitled to CVD paid on imported goods debited through DEPB scrips except for stating that it was time barred. The finding of the Tribunal on revenue neutrality is as follows: “In the present case, it is not in dispute that, during 2004-05 and afterwards, the appellants were entitled to avail CENVAT credit of CVD paid through DEPB on the imported raw material. Similar credit of duty of excise paid on indigenous raw material also was, of course, available to them. For the prior period, the demand is evidently hit by time-bar for the reasons stated by learned counsel.” The Tribunal has failed to note that for the period upto 31.08.2004, the judgment of this Court in Mohan Breweries and Distilleries Limited case, squarely applies. __________ Page14 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

(17) The issue before the Division Bench of this Court in the Mohan Breweries’ case was whether CENVAT credit could be availed, if the same was paid upon debit entry in passbook entry in DEPB scheme and without paying it in cash. (18) The Division Bench after referring to EXIM Policy as also the notifications connected therewith, held as follows: “14.But as pointed out by the learned Standing Counsel for the Revenue, DEPB Scheme was actually introduced in the EXIM Policy, to neutralize the incidence of customs duty on import content of export products. The credit itself is available against exports products. What is refundable under Rule 5 of the Cenvat Credit Rules, 2002, is actually of ‘’such amount’’ and hence the same can be relatable only to the payment. 15.Though the appellant claimed to have availed the benefit of exemption under Notification No.34/97, and cleared the goods by debiting DEPB, for both customs duty as well as additional customs duty, it is claimed by the respondents that under the relevant Bill of Entry bearing No.45901, dated 25.01.2003, they availed the benefit of exemption Notification No.45/2002, dated 22.04.2002. The Notification No.34/97, dated 07.04.1997 relates to EXIM Policy April, 97-March, 2002. But the Notification No.45/2002 pertains to EXIM Policy April, 2002-March, 2007.

16.According to the respondents, when the Bill of Entry dated 25.01.2003, which is the relevant document specified in Rule 7 of the Cenvat Credit Rules, 2002, did not indicate payment of any duty, no Cenvat Credit can be availed. Therefore, we do not think that the Tribunal committed any mistake in law. __________ Page15 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 17.Under the Exemption Notifications, if the importers produced DEPB scrip and availed the exemption for clearance of goods, the goods become non-duty paid goods. The value of DEPB scrip, once used, gets extinguished and hence there would be no question of seeking Cenvat credit thereafter. 18.In Commissioner of Central Excise V. Precision Pipes [2014 [302] E.L.T. 184], the Allahabad High Court held that as per para 4.3.5 of the Exim Policy, it was only when the additional customs duty was paid in cash on inputs under DEPB that it could be adjusted against the Cenvat credit or Duty Drawback. 19.As we have indicated earlier, the Commissioner (Appeals) as well as the Tribunal relied upon a Larger Bench decision of the CESTAT in ESSAR Steel Limited V. Commissioner [2004 (173) E.L.T 239]. The said decision is not overruled so far by any High Court. But according to the learned counsel for the appellant, the decision of the Larger Bench was watered down to a great extent by this Court in Commissioner of Central Excise v. Spci Limited [2014 (305) E.L.T. 484].

20.But a careful look at the decision in Spic would show that the case related to imports made prior to the year 2000. In paragraph 16 of the decision in Spic, the Court pointed out as follows:- ‘’16.It is no doubt true that under the Scheme available from 1.4.2000, there is a specific prohibition that wherever the additional customs duty is adjusted from DEPB, the assessee would not be entitled to Cenvat/Drawback. However, in the absence of any such specific prohibition for the period prior to 2000, considering the provision under Paragraph 7.25 that a holder of DEPB shall have the option to pay additional customs duty if any, in cash, the provision under Paragraph 7.41 could only be read as recognizing payment in cash too available for adjustment under Modvat Scheme. Thus, in the absence of any restrictive wording, we do no find __________ Page16 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 any justification to deny the benefit of Modvat credit available to a case covered by the credit taken under the Passbook Scheme.’’

21.Therefore, after a specific prohibition was introduced under the Scheme from 1.4.200 onwards, it is not possible for the appellant to claim the benefit in respect of the Bill of Entry of the year 2003. Therefore, the decision in Spic, even if it is taken to water down the decision of the Larger Bench in ESSAR Steel Limited, does so only in respect of the period prior to 2000. Therefore, the decision of this Court in Spic is not favourable to the appellant.” (19) From the above judgment, it is clear that for the period upto 31.08.2004, unless the duty was paid in cash, the CENVAT credit was not available since mere payment by debit in the DEPB scrips was of no avail. Assuming that the CENVAT credit for duty debited in DEPB scrips was available, in view of the categorical finding of the Division Bench that the value of DEPB scrip, once used, gets extinguished and there would be no question of seeking CENVAT credit thereafter, squarely applies and therefore the contention of the learned counsel for the 1st respondent cannot be sustained. (20) For the period subsequent to 31.08.2004, in view of the change in Foreign Trade Policy, the CENVAT credit was available for adjustments made in the DEPB scrips. The finding of the Tribunal for the period 2004-05, reads as follows: “There can be no doubt that the total amount of admissible credit would exceed the amount of duty __________ Page17 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009

demanded by the Commissioner for 2004-05 and 05- 06. In the result, the entire demand is liable to be set aside and the appeal be allowed. It is ordered accordingly.” From the aforesaid finding, it is seen that the Tribunal without any basis, cryptically held that the total amount on the admissible credit exceeded the amount of duty demanded by the Commissioner for the period 2004-05 and 2005-06. We are of the view that perversity is writ large in the said finding of the Tribunal as it has failed to substantiate on what basis or material it arrived at the finding. The plea of revenue neutrality could not have been accepted in the absence of a factual determination by the Tribunal, based on the materials on record, as to the quantum of CENVAT credit available to the assessee, only upon recording such a finding the Tribunal could have legitimately concluded that the situation was revenue neutral. (21) The Tribunal ought to have further seen that it is the 1st respondent who pleaded revenue neutrality, ergo, the burden was heavy on the 1st respondent to place the supporting materials before the authorities to establish that the CENVAT credit of CVD paid through DEPB scrips was equal to or exceeded the amount of duty demanded by the Commissioner for the period 2004-05 and 2005-06. We, therefore accept the contention of the learned counsel for the appellant that Tribunal's finding on revenue neutrality is untenable and liable to be set aside. __________ Page18 of 25

https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 Limitation: (22) In so far as applicability of the extended period of limitation is concerned, we find that the Appellate Authority has dealt with the same in a very Cavalier fashion. The Tribunal on the issue of limitation held as follows: “For the prior period, the demand is evidently hit by time-bar for the reasons stated by learned counsel.” (23) The said finding is patently unreasonable. On consideration of the entire materials and after elaborate discussion of each of the aspects of Section 11A, the Original Authority, held as follows: “When the whole case is considered dispassionately, it is well evident that CGL had made serious attempts to make mockery of settled laws and concealed their activities from the knowledge of the Department in pursuit of profit motive at the cost of Government Revenue. In these circumstances, the principles set out by the Hon’ble Supreme Court to demand duty under extended proviso to Section 11A[1] being fully present, invocation of the same in this case is well justified.”

(24) In the absence of any justifiable reasons to overturn the said finding of the Original Authority by the Tribunal, and in view of the finding of fact rendered by the Original Authority, that there was deliberate suppression of facts with an intention to evade payment of duty and that the plea of bona fide belief was also not made out, we are of the view that Section 11A was rightly invoked by the Revenue/appellant. Therefore, the finding of the Tribunal on application of extended period of limitation for the period prior to 31.08.2004 is concerned is set aside as illogical and unreasonable. __________ Page19 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 Penalty and Interest: (25) On the issue of penalty and interest, we find that the Original Authority after considering the statements of the 1st respondent’s officials and on appreciation of the materials on record found that the 1st respondent had by its positive activities with a view to evade the payment of excise duty contravened the provisions of Rules 4, 6, 8, 10, 11 and 12 of the Central Excise Rules 2002 and therefore, imposed deterrent penalty in terms of Section 11AC read with Rule 28 of the Central Excise Rules, 2002 and interest under Section 11AB of the Act. In our view, the findings of fact call for no interference, since we find no perversity in such finding. (26) In view of the above discussions, the substantial questions of law framed are answered in favour of the Revenue.

(27) Accordingly, this Civil Miscellaneous Appeal is allowed and the Final Order No.905/2007 dated 19/07/2007 in Appeal No.E/25/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, is confirmed. No costs. Consequently, the connected miscellaneous petition is closed. (G.J.,J.) (N.M.,J.) 23.07.2026 Index: Yes Speaking/Non-speaking order Neutral Citation: Yes/No dsn/AP __________ Page20 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 To 1.M/s.Computer Graphics Ltd 31/A9 & 10, Sidco Industrial Estate, Ambattur, Chennai-98. 2.The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe, 1st Floor, No. 26, Haddows Road, Chennai-600 006. __________ Page21 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 DR.G.JAYACHANDRAN J. and N.MALA J. dsn/AP Judgment in CMA No. 507 of 2009 Delivered on 23.07.2026 __________ Page22 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27-07-2026 CORAM THE HON'BLE DR JUSTICE G. JAYACHANDRAN AND THE HON'BLE MRS.JUSTICE N. MALA CMA No. 507 of 2009 The Commissioner Of Central Excise, Chennai Ii Commissionerate, 692, Mhu Complex, Anna Salai, Nandanam, Chennai-35. ..Appellant(s) Vs 3. M/s.Computer Graphics Ltd 31/a9&10, Sidco Industrial Estate, Ambattur, Chennai-98. 4. The Customs

Excise And Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe I Floor, 26, Haddows Road, Chennai-6. ..Respondent(s) CMA No. 507 of 2009 For Appellant(s): M/s.A.P.Srinivas, Standing counsel For Respondent(s): R2 - Tribunal M/s.L.Maithili For R1 Order (Order of the Court was made by Dr.G.Jayachandran J.) Today, the above matter is listed under the caption ‘’For Being Mentioned’’ at the instance of the learned Standing counsel for the appellant. __________ Page23 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 2.The learned Standing counsel for the appellant submitted that this Court had allowed the above Civil Miscellaneous Appeal filed by the appellant, vide judgment dated 23.07.2026. However, in the last paragraph of the judgment, namely, paragraph No.27, instead of setting aside the Final Order No.905/2007 dated 19/07/2007 in Appeal No.E/25/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, it has been wrongly mentioned as ‘’confirmed’’. Hence, the learned Standing counsel prays for appropriate orders.

3.It is seen that due to inadvertence, in paragraph No.27 of the judgment dated 23.07.2026, instead of mentioning the Final Order No.905/2007 dated 19/07/2007 in Appeal No.E/25/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, as ‘’set aside and reversed’’, it has been wrongly typed as ‘’confirmed’’ 4.Hence, this Court directs the Registry to delete the word ‘’confirmed’’ in paragraph No.27 and replace the same as ‘’set aside and reversed’’ and issue fresh judgment copy forthwith. (G.J.,J.) (N.M.,J.) 27-07-2026 AP Internet: Yes To 1. M/s.Computer Graphics Ltd 31/a9&10, Sidco Industrial Estate, Ambattur, Chennai-98. 2. The Customs Excise And Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe I Floor, 26, Haddows Road, Chennai-6. __________ Page24 of 25 https://www.mhc.tn.gov.in/judis CMA No. 507 of 2009 DR.G.JAYACHANDRAN J. AND N.MALA J. AP CMA No. 507 of 2009 27-07-2026 __________ Page25 of 25 https://www.mhc.tn.gov.in/judis