2004 (5) TMI 375 - AT - Central Excise

Summary

Issues:
Eligibility of plastic pouches for exemption under Notification No. 4/97 based on the condition of no credit of duty paid on inputs availed by the manufacturer.

Analysis:
The dispute in this case revolves around the eligibility of plastic pouches for exemption under Notification No. 4/97, which is contingent upon not availing credit of duty paid on inputs used in the manufacturing process. The appellant's contention is that the identity of the manufacturer is irrelevant for determining eligibility for the exemption. The appellant argued that the exemption condition is solely related to not availing Modvat credit on the duty paid for the inputs used in manufacturing the goods. The appellant clarified that in their case, granules were used to produce film, on which duty was paid, and subsequently, the film was used to manufacture pouches without availing Modvat credit on the film. The appellant cited a previous Tribunal decision in support of their argument.

Upon reviewing the records and hearing the arguments, the SDR contended that since Modvat credit was taken on the duty paid for the granules, which were the original input for pouch production, the pouches were manufactured using inputs for which credit had been availed. However, the Tribunal found no merit in the Revenue's argument. The Tribunal emphasized that duty was paid at each stage of manufacturing new products, considering the manufacture of film from granules as a distinct manufacturing process. Therefore, the granules should not be considered the input for pouches; instead, the film should be regarded as the input. As there was no dispute regarding availing Modvat credit on the duty paid for the film, the Tribunal concluded that the appellant had correctly satisfied the exemption condition.

The Tribunal ruled that the dispute raised by the Revenue was irrelevant to the notification's requirements. Consequently, the duty demand and penalty imposed in the impugned order were deemed unwarranted. The Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, granting consequential relief. Additionally, since the appellant had already deposited a sum towards the duty demand and some goods were under seizure, the Tribunal directed the immediate return of the seized goods and the deposit to the appellant following the order's annulment.