2004 (2) TMI 429 - AT - Central Excise

Summary

Issues:
1. Entitlement to Modvat credit of Special Excise Duty on inputs falling under Chapter 21.
2. Applicability of Notification No. 21/99-C.E. (N.T.) amendment.
3. Vested rights of the assessee regarding Modvat credit.
4. Admissibility of Modvat credit based on invoice dates.
5. Interpretation of relevant case laws and circulars.
6. Imposition of penalty based on understanding of Notification.

Analysis:

1. The appellants, manufacturers of aerated waters and beverage syrups, were entitled to take credit of Special Excise Duty as per Notification No. 21/99-C.E. (N.T.). However, an amendment to the notification limited the Modvat credit on specified goods from a certain date. The issue arose when the department proposed to disallow the Modvat credit taken by the appellants on inputs falling under Chapter 21 after the specified date.

2. The substantive issue revolved around the accrual of the right to avail Modvat credit of Special Excise Duty on inputs. The appellants argued that their right to credit accrued upon payment of duty by the input-supplier and was not affected by the amendment to the notification. Reference was made to relevant case laws and circulars to support their claim.

3. The Departmental Representative (DR) contended that the credit taken by the assessee on certain invoice dates may not be admissible as the duty on those inputs was paid after the specified date in the amendment. The DR differentiated the case from previous rulings based on the specific rules involved.

4. The judgment analyzed the case law cited by both parties and concluded that the right to take credit of Special Excise Duty accrued to the appellants on the date of payment by the input manufacturer, as per relevant Apex Court rulings. Accordingly, the Modvat credit based on an invoice dated before the specified date in the amendment was deemed admissible.

5. However, the judgment clarified that the Modvat credit based on an invoice dated after the specified date was not admissible due to the payment of duty post-amendment. The interpretation of relevant case laws and circulars played a crucial role in determining the admissibility of the credit in each scenario.

6. Finally, the judgment addressed the imposition of a penalty on the appellants, noting that no mens rea could be attributed to them for their understanding of the Notification. Consequently, the penalty was set aside, and the appeal was allowed to the extent of modifying the impugned order regarding the penalty and Modvat credit based on specific invoice dates.