2003 (3) TMI 588 - AT - Central Excise

Summary

Issues:
Waiver of pre-deposit of duty and penalty based on the disallowance of credit on inputs and capital goods for availing Modvat credit despite no duty payable on the final products.

Analysis:

1. Disallowed Credit on Inputs and Capital Goods:
The applicants faced disallowance of credit on inputs and capital goods as they availed Modvat credit despite no duty being payable on the final products, newsprint. This contravened Rule 57C(1) and Rule 57R(1) of the Central Excise Rules, 1944. The jurisdictional Range Superintendent was informed by the applicants that the nil rate of duty for newsprint was not applicable until their registration as newsprint manufacturers under the Newsprint Control Order. The applicants registered in February 1999, and hence no demand existed for the subsequent period. The definition of newsprint as per Notification 23/98-C.E., dated 1-8-1998, specified it as paper intended for newspaper printing and manufactured by a newsprint manufacturer specified under the Newsprint Control Order. The applicants paid duty at 5% under Notification 5/98-C.E., dated 2-6-1998, claiming it covered certain paper types under Chapter 48. The tribunal found that the applicants' payment under Notification 5/98 was incorrect, but the lower appellate authority misdirected itself by holding that the nil rate for newsprint had no conditions and that Notification 23/98 only affected product classification, not the exemption notification.

2. Admissibility of Credit and Waiver of Pre-deposit:
The tribunal observed that since the applicants paid duty on their final products accepted as newsprint falling under Chapter Heading 48.01, which could not have been cleared at a nil rate of duty during the disputed period per Note 3 to Chapter 48 and Notification 23/98, the credit availed by the applicants was prima facie admissible. Consequently, the tribunal waived the pre-deposit requirement of duty and penalties, staying the recovery pending the appeals against the disallowed credit on inputs and capital goods.

This detailed analysis of the judgment from the Appellate Tribunal CEGAT, Mumbai, highlights the issues of credit disallowance, incorrect application of notifications, and the admissibility of credit, leading to the waiver of pre-deposit of duty and penalties pending appeal proceedings.