2003 (10) TMI 566 - AT - Central Excise

Summary

Issues:
Denial of credit claimed in respect of Additional Duties of Excise on inputs; Interpretation of Notification No. 5/94 regarding eligibility for credit; Whether yarn input can be utilized in the manufacture of fabrics exempt from Additional Duties of Excise (Textiles & Textile Articles) Act, 1978.

Analysis:
The appellants were issued a notice denying the credit claimed for Additional Duties of Excise paid on yarn inputs. The Commissioner (Appeals) upheld the denial based on the interpretation of Notification No. 5/94, specifying that the credit allowed for such duties should be utilized only towards payment of duties under the Additional Duties of Excise (Textiles & Textile Articles) Act, 1978 on final products or inputs. The Commissioner found that since the final products (fabrics) were exempt from these duties, the appellants could not claim credit for the yarn inputs.

Upon hearing both sides, it was established that there was no bar to the eligibility for credit on the duty paid for yarn under Additional Duties of Excise (Textile & Textile Article). The denial of credit was based on the presumption that yarn inputs should only be used in the fabrication of textiles subject to the Additional Duties of Excise (Textiles & Textile Articles) Act, 1978. However, it was argued that if the yarn inputs were not utilized as such or not accounted for, the credit of Additional Duties could be used to meet demands of duty on such inputs. The department's presumption to deny the movement of yarn under Rule 57F was deemed unjustified, leading to the conclusion that the orders denying credit should be set aside.

The final decision set aside the previous order and allowed the appeal, permitting the claimed credit to be transferred and kept in a separate account. The judgment emphasized that the appellants were eligible to maintain the credit amount of duties paid on yarn separately, even if the final products were exempt from the Additional Duties of Excise. The appeal was disposed of accordingly, granting relief to the appellants in this matter.