2002 (2) TMI 1008 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on lime (input) under an excise duty exemption notification.

Analysis:
The case involves a dispute over the denial of Modvat credit on lime used as a raw material by the appellants, who are engaged in manufacturing aluminum products. The Commissioner denied the credit based on the ground that lime was exempt from excise duty under a specific notification during the material period. The manufacturers of lime had paid duty on the product at the time of clearance to the appellants, who took credit for that duty. The department proposed to deny this credit, leading to the present appeal.

The appellant's advocate argued that a previous decision by the Tribunal favored the appellants in a similar case, citing CCE, Chandigarh v. Industrial Cables (I) Ltd. The advocate requested the appeal to be allowed based on this precedent. On the other hand, the respondent's representative contended that the cited decision was based on another Tribunal decision and highlighted a Supreme Court judgment to support the contention that voluntary payment of excise duty on exempted inputs does not entitle manufacturers to claim Modvat credit for their final products.

Upon examination of the submissions, the Tribunal found that the earlier decision in Industrial Cables was relevant. The Tribunal noted that the duty was actually paid on the exempted input by the manufacturer of lime, and the credit was rightfully taken by the appellants. The Tribunal also distinguished the Supreme Court's judgment cited by the respondent, emphasizing the factual differences between the cases. In the present case, the manufacturer of lime had paid duty on the raw material, allowing the appellants to claim Modvat credit, which was permissible under Rule 57A.

Consequently, the Tribunal held that the Modvat credit on lime was lawfully taken by the appellants. Regarding the penalty imposed on the appellants for unauthorized Modvat credit on other items, the Tribunal modified the penalty amount to Rs. 10,000, considering the facts and circumstances of the case. The appellants were granted consequential relief accordingly.