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2003 (12) TMI 396 - AT - Central Excise

Issues:
Wrongful availment of Modvat credit on molasses used in the manufacture of exempted and dutiable excisable goods, applicability of Rule 57AD, confirmation of duty demand, imposition of penalty.

Analysis:

The appeals revolve around the challenge to the impugned order-in-appeal confirming duty demand, penalty, and interest against the appellants for wrongful availment of Modvat credit on molasses used in the production of ethyl alcohol, an exempted excisable good, and ethyl alcohol denatured, a dutiable excisable product.

The central issue in all appeals pertains to the interpretation and application of Rule 57AD concerning the availment of Modvat credit. The appellants argued that since they manufactured both exempted and dutiable products, they were covered by Rule 57AD and thus no demand should be upheld against them. However, the tribunal found that the appellants failed to maintain separate inventory and accounts for the molasses used in the manufacture of exempted ethyl alcohol, leading to the denial of Modvat credit for the disputed period.

The tribunal acknowledged that the appellants genuinely believed they were entitled to the benefit of Rule 57AD(2) and had been reversing credits for exempted products. Given the circumstances and the absence of mala fide intent, the tribunal decided to set aside the penalty imposed on the appellants. The appellants' compliance with the reversal of credits and their manufacturing of dutiable products using duty-paid molasses further supported the tribunal's decision to annul the penalty.

In conclusion, the tribunal modified the impugned order by upholding the duty demand confirmation while setting aside the penalty imposition on the appellants. The judgment serves as a reminder of the importance of strict adherence to procedural requirements and maintaining separate accounts for inputs used in the manufacture of exempted goods to avail of Modvat credit under the relevant rules.

 

 

 

 

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