2001 (10) TMI 611 - AT - Central Excise

Summary

Issues:
1. Eligibility for Modvat credit under different Central Excise notifications.
2. Applicability of duty exemption under Notification No. 16/97.
3. Imposition of penalties under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules.
4. Challenge against the orders of the Additional Commissioner of Central Excise and the Commissioner of Central Excise (Appeals), Chandigarh.

Analysis:

1. The appellant, a Small Scale Unit manufacturing iron and steel products, initially availed small scale exemption under Notification No. 16/97 but later opted for paying Central Excise duty under Notification No. 38/97 to avail Modvat benefit on inputs. The Central Excise authorities objected to the appellant taking Modvat credit on input purchases from 1-4-97. The Additional Commissioner of Central Excise ordered the appellant to pay duty on all clearances from 1-4-97 and denied Modvat credit on inputs, imposing penalties under Section 11AC and Rule 173Q. The appeal challenging these orders was rejected by the Commissioner of Central Excise (Appeals), leading to the present appeal.

2. During the hearing, the appellant's Counsel argued that no duty evasion occurred as goods valued at Rs. 29 lakhs were cleared under Notification No. 16/97 without payment of duty. The appellant had reversed the Modvat credit taken for inputs consumed during this period as per the Tribunal's Stay Order. Subsequent removals were done under Notification No. 38/97. The Counsel contended that duty demands and penalties should be set aside. The Departmental Representative argued that simultaneous availing of Modvat credit and duty exemption was not permissible.

3. The Tribunal found that the appellant did not utilize Modvat credit for the goods cleared under Notification No. 16/97. The credit for inputs during this period was reversed as per the Tribunal's Stay Order. The appellant was entitled to Modvat credit for the period under Notification No. 38/97. With the reversal of credit under Notification No. 16/97, the charge of simultaneous availing of Modvat credit and exemption became invalid. Consequently, the Tribunal confirmed the reversal of Modvat credit and allowed the appeal, setting aside the impugned order.

4. In conclusion, the Tribunal upheld the reversal of Modvat credit but allowed the appeal, setting aside the orders of the Central Excise authorities. The appellant had complied with the order for credit reversal. Therefore, the penalties imposed were not sustained, and the appellant's actions were deemed valid under the changed notification regime.