2003 (1) TMI 582 - AT - Central Excise

Summary

Issues:
1. Setting aside of Order-in-Appeal No. 29/2000-C.E.
2. Restoration of Order-in-Original No. 111/97.
3. Interpretation of Notification No. 1/93 regarding Central Excise duty exemption.
4. Conflict between Rule 57Q and Notification No. 1/93.

Analysis:

1. The appeal was filed to set aside Order-in-Appeal No. 29/2000-C.E., seeking restoration of Order-in-Original No. 111/97, which confirmed a duty demand of Rs. 3 Lakhs by the Assistant Commissioner. The Commissioner had initially set aside this duty demand, leading to the appeal.

2. The dispute centered around M/s. Kerala Rubber and Reclaims Ltd., a manufacturer of reclaimed rubber availing total exemption from Central Excise duty under Notification No. 1/93. The contention arose when the authorities objected to the exemption, citing the availing of Modvat credit on capital goods under Rule 57Q. The Commissioner upheld the duty demand, prompting the appeal.

3. The Commissioner, in the impugned order-in-appeal, noted that the provision imposing 10% duty upon availing credit on capital goods under Rule 57Q was deleted from Notification No. 1/93 by Notification No. 14/96. This deletion, along with inconsistencies with other Modvat provisions, led to the allowance of the appeal as the objection was deemed inapplicable for the relevant period.

4. The appellant argued that there was no conflict between Rule 57Q and Notification No. 1/93, as the notification merely prescribed a different duty rate for those availing Modvat credit on capital goods without prohibiting credit uptake. However, the Tribunal found that the appellant had not availed of Modvat credit during the period of total exemption, making the duty demand unjust and unwarranted.

5. Ultimately, the Tribunal rejected the appeal, affirming the decision to set aside the Order-in-Original and dismissing the argument that returning the remaining credit balance would resolve the dispute. The judgment emphasized the absence of Modvat credit uptake during the exemption period, leading to the rejection of the appeal and upholding of the duty demand setting aside.