2003 (6) TMI 423 - AT - Central Excise

Summary

Issues:
1. Exemption under Notifications 217/85, 69/86, and 326/86 for bearings used in specific machinery.
2. Availability of exemption under Notification 217/86 for goods utilized in the factory.
3. Liability to pay duty on parts utilized in manufacturing bearings.
4. Applicability of interest under Section 11AA on delayed payment of duty.
5. Interpretation of provisions of Section 11AA and Section 11AB.
6. Impact of Trade Notice 214/88 on the case.

Analysis:

1. The appellant, a manufacturer of ball and roller bearings, cleared bearings without duty payment under various exemptions. The dispute arose regarding the availability of exemption under Notification 217/86 for parts used in bearing manufacturing. The Deputy Commissioner demanded duty of Rs. 28,89,228/-, which was confirmed by the Commissioner (Appeals).

2. The appellant argued that by reversing Modvat credit on inputs used in manufacturing parts for exempted bearings, it effectively paid duty. The contention was that interest should only apply to the difference between Modvat credit availed and reversed. The department contended that Modvat credit reversal did not equate to duty payment on parts.

3. The Tribunal found that the reversal of Modvat credit did not constitute payment of duty on parts. The provisions of Section 11AA were analyzed, and it was determined that interest would apply if duty was not paid within the specified period. The Tribunal clarified the distinction between Section 11AA and Section 11AB.

4. The Tribunal emphasized that interest on delayed duty payment runs concurrently with the duty liability. It was concluded that the reversal of Modvat credit was not equivalent to duty payment. Interest was deemed payable on the remaining amount until the specified date.

5. The appellant cited Trade Notice 214/88, arguing that it supported their position on the exemption under Notification 217/85. The Tribunal held that the department could not take a stand contrary to a beneficial trade notice. The matter was remanded to determine the duty and interest quantum based on the trade notice's provisions.

In conclusion, the Tribunal allowed the appeal, remanding the case to the Assistant Commissioner for further assessment based on the Trade Notice 214/88's implications on the duty and interest calculations.