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2004 (7) TMI 522 - AT - Central Excise
Issues:
Denial of Modvat credit to the appellants due to availing SSI exemption Notification No 16/97-C.E. Analysis: The appeal concerns the denial of Modvat credit to the appellants as per the impugned order-in-appeal, based on their utilization of Modvat credit during the period of availing SSI exemption Notification No 16/97-C.E. The lower authorities disallowed the credit on the grounds that the appellants were enjoying the SSI exemption during the same period. The appellant's counsel argued that while under the SSI exemption, the department could withdraw the exemption benefits but could not deny the Modvat credit. Reference was made to legal precedents supporting this argument, emphasizing that Modvat credit could not be denied based on violation of the exemption notification terms. The Departmental Representative (DR) contended that the appellants, by availing the SSI exemption, were not entitled to the Modvat credit facility. The DR argued that even if the credit was not utilized, the appellants were obligated to reverse the credit. The Tribunal analyzed the records and noted that the appellants initially benefited from the SSI exemption but were expected to cross the exemption limit by a specified date. However, before reaching that date, the appellants availed Modvat credit on inputs purchased from 1-1-98 to 8-1-98, the date they were to cease the exemption benefits. The Tribunal observed that even if the appellants wrongly availed the SSI exemption, they would only be liable to pay duty on goods cleared after the violation date. However, the department did not issue a show cause notice for duty payment but instead demanded credit reversal. The Tribunal held that the Modvat credit, taken as per the Modvat Credit Rules, could not be reversed without proper justification. It was noted that the appellants did not utilize the credit for duty discharge until surpassing the SSI exemption limit, aligning with legal precedents that credit reversal could not be mandated solely based on exemption violation. Consequently, the Tribunal set aside the impugned order, allowing the appeal of the appellants with applicable consequential relief under the law.
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