2004 (4) TMI 509 - AT - Central Excise

Summary

Issues:
1. Central Excise duty demand on an assessee availing Modvat credit.
2. Eligibility of credit in four cases leading to consequential duty demand, penalty, and interest.
3. Correctness of debit entries in RG 23A registers and the requirement under Section 35F of the Central Excise Act.
4. Permissibility of duty deposits under Section 35F from Modvat account and the correction of impermissible entries.

Analysis:

Issue 1: Central Excise duty demand on an assessee availing Modvat credit
The appellant, an assessee under the Central Excise Act availing Modvat credit, faced a demand of Rs. 85,05,958 along with a penalty of Rs. 10 lakhs and interest under Section 11AA. The department imposed these demands due to the assessee taking credit of Rs. 85,05,958 on their own after filing an order-in-appeal. This action was deemed a gross misdemeanour, leading to the consequential duty demand, penalty, and interest. The appeal was filed against these demands.

Issue 2: Eligibility of credit in four cases leading to consequential duty demand, penalty, and interest
Upon hearing both sides, it was found that in four cases totaling to a credit of Rs. 85,05,958, the credit was deemed ineligible. The assessee appealed against these orders of ineligibility. The Commissioner (Appeal) remanded three cases for de novo consideration and allowed the appeal in one case. Subsequently, the assessee suo motu took credit of the amount in all four cases, resulting in the impugned proceeding.

Issue 3: Correctness of debit entries in RG 23A registers and the requirement under Section 35F of the Central Excise Act
The judgment referred to the settled law that debit entries in the RG 23A registers constitute a deposit made to meet the requirements under Section 35F of the Central Excise Act. The appellant relied on precedents and orders confirming that pre-deposits made under Section 35F do not require a formal refund application. The reversal of credit by a debit entry in this case was considered valid, as the appellant had made the necessary applications, rendering the order unsustainable.

Issue 4: Permissibility of duty deposits under Section 35F from Modvat account and the correction of impermissible entries
From another perspective, the judgment discussed the permissibility of duty deposits under Section 35F from the Modvat account. It was highlighted that incorrect impermissible entries of debit should be corrected by a cross credit entry as per the Central Excise Rules and accounting principles. The reversal entry made by the assessee in this case was deemed permissible, as it was within the bounds of maintaining credit accounts and correcting entries in the books.

In conclusion, the judgment found no merits in the impugned order and set it aside, allowing the appeal in favor of the appellant.