2001 (11) TMI 759 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification 158/68 exempting duty on soda ash used in brine purification.
2. Disallowance of Modvat credit on duty paid on soda ash.
3. Application of precedents in similar cases for Modvat credit denial.
4. Effect of departmental permission on payment of duty on exempted goods.

Interpretation of Notification 158/68:
The appellant, engaged in soda ash manufacturing, utilized soda ash for brine purification exempted under Notification 158/68. Despite difficulties, the appellant informed the Asstt. Commissioner and paid duty on soda ash used for purification, taking Modvat credit. The issue arose when the department proposed disallowing the Modvat credit, claiming the duty paid was a deposit, not excise duty. The appellant argued that as duty was paid with departmental concurrence, credit couldn't be denied.

Disallowance of Modvat credit:
The Asstt. Commissioner and Commissioner (Appeals) upheld the denial of Modvat credit, stating the duty paid on exempted soda ash wasn't available as credit. The appellant contended that the department's permission to pay duty on exempted goods bound them, citing precedents where Modvat credit was allowed based on approved product classifications. The Tribunal emphasized that once a classification was approved, credit couldn't be denied without following proper procedures.

Application of precedents:
Referring to past cases, the Tribunal highlighted that Modvat credit couldn't be denied if the final product classification was approved, even if not specified in the notification. The Tribunal stressed that the department's initial permission to pay duty on exempted goods, akin to approving a classification list, bound them until withdrawn or set aside by law. The department's failure to reverse the permission meant the appellant rightfully took Modvat credit.

Effect of departmental permission:
The Tribunal concluded that the appellant's duty payment on exempted goods, with departmental consent, was binding until formally withdrawn. The permission acted as an approved classification list, and without revocation, the appellant was entitled to Modvat credit. As the department didn't take steps to cancel the permission, the appellant's appeal was allowed, setting aside the impugned order.

In summary, the judgment addressed the correct interpretation of duty exemptions, the validity of Modvat credit denial, reliance on precedents for credit allowance, and the significance of departmental permission on duty payment for exempted goods. The Tribunal emphasized that approved classifications and permissions from authorities bind the department until properly revoked, ensuring rightful entitlement to Modvat credit.