2004 (2) TMI 556 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification No. 8/96-C.E regarding duty exemption for dyed yarn.
2. Eligibility of availing Modvat credit on duty paid textured yarn.
3. Imposition of penalty under Rule 173Q.

Interpretation of Notification No. 8/96-C.E:
The appeal was filed against an order-in-Appeal regarding duty exemption for dyed yarn under Notification No. 8/96-C.E. The Appellants argued that they had a stock of dyed yarn manufactured from duty paid textured yarn before the withdrawal of the Notification on 1-3-97. The Commissioner (Appeals) set aside the demand for a specific period but confirmed it for another period and imposed a reduced penalty. The Appellants contended that they were eligible for Modvat credit on duty paid textured yarn used in manufacturing dyed yarn cleared without duty payment. Citing relevant case laws, they argued against the penalty imposition under Rule 173Q.

Eligibility of Modvat credit:
The Departmental Representative argued that once duty became payable on dyed yarn, no duty liability on textured yarn was required as the benefit of Notification No. 67/95-C.E could have been availed. The Tribunal considered both sides' submissions and found that before the withdrawal of Notification No. 8/96, the dyed yarn was exempt if manufactured from duty paid textured yarn. As the dyed yarn became dutiable, the Appellants could avail Modvat credit on the duty paid textured yarn used in manufacturing. The Tribunal concluded that the Appellants were eligible for Modvat credit, and since the credit amount exceeded the duty confirmed, no penalty was applicable.

Imposition of penalty under Rule 173Q:
The Appellants argued against penalty imposition, stating that Rule 173Q provisions were not invoked in the show cause notice. The Tribunal, after considering the facts and submissions, held that the Appellants could avail Modvat credit on duty paid inputs, rendering no penalty imposition necessary. Consequently, the Tribunal allowed the appeal in favor of the Appellants, highlighting the eligibility for Modvat credit and the absence of penalty imposition under Rule 173Q.