2004 (8) TMI 518 - AT - Central Excise

Issues Involved:
1. Sanction of rebate on merits.
2. Availment and lapse of Modvat credit under Rule 57A and Rule 57H(7).
3. Eligibility for refund under Rule 57F(13).
4. Scope of appeal regarding the grant of rebate.
5. Imposition of penalty under Rule 173Q and demand of interest under Section 11AB.

Issue-wise Detailed Analysis:

1. Sanction of Rebate on Merits:
The Commissioner of Central Excise (Appeals), Chennai, directed the original authority to consider the question of sanction of rebate on its merits. The Revenue challenged this finding, arguing that the assessee did not pray for a grant of rebate and that the grant of rebate depends on statutory provisions, including the filing of declarations and certification by Central Excise officers in ARE2 at the time of export.

2. Availment and Lapse of Modvat Credit under Rule 57A and Rule 57H(7):
The assessee-respondents, engaged in manufacturing air-conditioners, availed Modvat credit on inputs under Rule 57A and claimed exemption from payment of duty under Notification No. 75/87. The Revenue argued that under Rule 57C, no credit of specified duty is allowed if the final product is exempt from duty. The assessee carried forward unutilized credit and took fresh credits during the exemption period, which the Revenue contended was incorrect as per Rule 57H(7). This rule states that credit lying as on the date of opting for exemption lapses and cannot be utilized for payment of duty on any excisable goods.

3. Eligibility for Refund under Rule 57F(13):
The assessee claimed a refund of Rs. 3,53,075.82 for duty paid on inputs used in manufacturing exported goods, citing Rule 57F(13). The Revenue opposed this, arguing that since the entire credit lapsed on the date of opting for exemption, no refund could be claimed. The Tribunal referred to the Larger Bench decision in Hotline Teletubes & Components Ltd. v. CCE, Bhopal, which held that refund of credit is possible only if the credit is lying in balance in the Modvat account.

4. Scope of Appeal Regarding the Grant of Rebate:
The Revenue contended that the Commissioner (Appeals) went beyond the scope of the appeal in granting rebate since the assessee did not specifically pray for it. However, the Tribunal noted that the assessee had taken a specific ground in their appeal for refund as rebate. Following the Larger Bench decision in Hotline Teletubes, the Tribunal upheld the remand of the matter for consideration of the rebate on merits.

5. Imposition of Penalty under Rule 173Q and Demand of Interest under Section 11AB:
Given the circumstances, the Tribunal found no justification for imposing a penalty of Rs. 1,00,000 under Rule 173Q or demanding interest under Section 11AB. The Tribunal modified the impugned order accordingly and disposed of the appeal.

Conclusion:
The Tribunal concluded that the assessee-respondents were not entitled to a refund of the duty paid on inputs used in exported goods due to the lapse of credit as per Rule 57H(7). However, the Tribunal upheld the remand for consideration of the rebate on merits and found no grounds for imposing penalties or demanding interest.

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