2003 (3) TMI 625 - AT - Central Excise

Summary

Issues:
1. Permission to operate under Section 3 of the Central Excise Act, 1944.
2. Dispute regarding payment of duty under Rule 96ZO(3) for a specific period.
3. Allegation of irregular Modvat credit availed by the appellants.
4. Review of permission granted by the Commissioner after one year.

Analysis:
1. The appellants were initially permitted to operate under Section 3 of the Central Excise Act, 1944, as confirmed by a letter dated 20-3-98. This permission allowed them to clear products on payment of duty and avail Modvat credit. The Commissioner later directed them to pay duty under Rule 96ZO(3) for the period from January 1998 to 15-5-99 due to unsatisfactory revenue performance. The appellants argued that the subsequent demand was unjustified as they had complied with the initial permission.

2. The Commissioner's decision to demand duty under Rule 96ZO(3) was based on the appellants' revenue performance and their use of Modvat credit during the relevant period. The Commissioner justified the demand by citing the Induction Furnace Annual Capacity Determination Rules, 1997, and held that the duty demand was in accordance with the law. However, the appellants contended that they primarily manufactured alloy steel ingots and incidentally non-alloy steel ingots, making the said rules inapplicable.

3. The appellants challenged the Commissioner's decision to disallow the Modvat credit availed during the period in question. They argued that the permission granted to operate under Section 3 had not been contested by the Revenue and had attained finality. The Tribunal noted that the assessments were not provisional during the relevant period, and raising a duty demand after a year without a show cause notice was unjustified.

4. The Tribunal found that the Commissioner could not review his own permission granted to the appellants to operate under Section 3 after a year, especially without any appeal against it. The Tribunal held that the demand for duty, reversal of Modvat credit, and imposition of interest were not justified. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants with consequential reliefs.