2001 (11) TMI 852 - AT - Central Excise

Summary

Issues:
1. Duty remission on burnt/damaged kraft paper.
2. Denial of Modvat credit.
3. Imposition of penalty under Section 11AC.
4. Demand of interest under Section 11AB.

Issue 1: Duty remission on burnt/damaged kraft paper:
The appellants, manufacturers of kraft paper, faced a fire accident resulting in damage to their goods. They filed an FIR, informed the relevant authorities, and conducted salvaging operations. The final report indicated 3,13,791.200 Kgs. of paper burnt/damaged. A remission application was submitted for duty on this quantity after receiving a show cause notice for the same. The Commissioner confirmed duty demand on a portion of the damaged paper, imposed a penalty, and demanded interest. The appellants contested the duty demand, arguing that remission should be granted for the burnt paper. The Tribunal found that the appellants provided evidence of the salvaging operations and satisfied the requirements for remission under Rule 49. Consequently, the remission was allowed, and no duty was levied on the burnt paper. The Tribunal criticized the adjudicating authority for ignoring crucial evidence and set aside the Commissioner's order.

Issue 2: Denial of Modvat credit:
The Commissioner directed the reversal of Modvat credit on inputs used in manufacturing the paper burnt in the fire, despite no such proposal in the show cause notice. The Tribunal deemed this action beyond the notice's scope and unnecessary since the duty demand on the burnt paper was vacated. Therefore, the denial of Modvat credit was unwarranted and set aside.

Issue 3: Imposition of penalty under Section 11AC:
A penalty was imposed under Section 11AC of the Central Excise Act by the Commissioner. The Tribunal ruled this penalty as beyond the show cause notice's scope, especially since the duty demand on the burnt paper was rejected. Consequently, the penalty was deemed unjustified and set aside.

Issue 4: Demand of interest under Section 11AB:
The Commissioner demanded interest on duty under Section 11AB of the Act. However, since the duty demand was vacated due to the remission granted on the burnt paper, the Tribunal found no basis for levying interest. Therefore, the demand for interest was considered unnecessary and set aside.

In conclusion, the Tribunal allowed the appeal, setting aside the Commissioner's order and ruling in favor of the appellants on the duty remission, denial of Modvat credit, imposition of penalty, and demand of interest issues. The Tribunal emphasized the appellants' compliance with remission requirements and criticized the adjudicating authority for overlooking crucial evidence in their decision-making process.