2004 (7) TMI 532 - AT - Central Excise

Summary

Issues:
Denial of benefit under Notification No. 5/98-C.E. for Dyed Textured Yarn due to availing Modvat credit on Filament Yarn.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved a dispute regarding the denial of the benefit of Notification No. 5/98-C.E. to the respondents for Dyed Textured Yarn. The issue arose as the Revenue contested the applicability of the concessional duty under the said notification, claiming that the respondents had availed Modvat credit on the Filament Yarn used in manufacturing Synthetic Filament Textured Yarn, thus hindering their eligibility for the concessional rate of duty. Both the Commissioner (Appeals) and the adjudicating authority had ruled in favor of the respondents, dropping the duty demand against them.

The Revenue argued that since the respondents had utilized Modvat credit on the Filament Yarn, they were unable to fulfill the conditions for the concessional duty under Notification No. 5/98-C.E. The Revenue contended that the impugned order should be set aside due to this reason.

On the contrary, the respondents' counsel supported the validity of the impugned order, emphasizing that the respondents had not availed Modvat credit on the duty-paid Textured Yarn used as inputs in the production of Dyed Textured Yarn. Therefore, they were entitled to the benefit of the notification.

After hearing both sides and examining the records, the Tribunal observed that the respondents had indeed availed Modvat credit on the Filament Yarn for manufacturing Synthetic Filament Textured Yarn but had not taken any credit on the duty-paid Textured Yarn used in producing Dyed Textured Yarn. The Tribunal referred to the proviso inserted to Rule 57F(12) of the Central Excise Rules, stating that the credit of specified duty allowed for inputs could be utilized for the duty payment of any final product. As the respondents had not utilized the Modvat credit for the Dyed Textured Yarn, they were within their rights to clear it at the concessional rate under the notification.

Consequently, the Tribunal upheld the impugned order passed by the Commissioner (Appeals), confirming the decision of the adjudicating authority to drop the duty demand against the respondents. The appeal of the Revenue was dismissed, affirming the respondents' eligibility for the concessional duty under Notification No. 5/98-C.E.