2005 (6) TMI 346 - AT - Central Excise

Summary

Issues: Classification of goods, Penalty under Central Excise Rules, Modvat credit eligibility

Classification of Goods:
The appellants, manufacturers of industrial fabrics, classified their goods under Chapter Heading Nos. 52.08 and 54.06, while the Department classified them under Heading 59.11. The dispute arose regarding the classification under the CETA Schedule. The appellants removed the products without duty payment, claiming exemption under a Notification. The Department objected, classified the goods under S.H 5911.90, and demanded duty. The main issue was whether the appellants were liable to be penalized under Rules 25 and 27 of the Central Excise (No. 2) Rules, 2001. The authority imposed a penalty, which was later reduced on appeal. The appellants contended they had correctly classified the goods based on Tribunal decisions, and there was no misdeclaration or intent to evade duty. The Tribunal found in favor of the appellants, setting aside the penalty and demand for interest.

Penalty under Central Excise Rules:
The Department proposed a penalty on the appellants for alleged misdeclaration, which was based on the misclassification of goods. The appellants argued that they had correctly classified the goods based on Tribunal decisions, and there was no intent to evade duty. The Tribunal agreed with the appellants, stating that the misclassification issue arose due to conflicting Tribunal decisions and the appellants' classification was supported by precedent. Consequently, the penalty and demand for interest were set aside.

Modvat Credit Eligibility:
The appellants sought Modvat credit on inputs used in the final products cleared during the disputed period. The Revenue did not dispute the final products' specification for Modvat purposes or the use of specified inputs. The appellants were denied the Modvat benefit by lower authorities for not being registered with the Central Excise department during the material period. However, the Tribunal noted that the appellants were now registered and following the required procedures. Therefore, the Tribunal directed the original authority to verify duty-paying documents and allow the Modvat credit benefit on inputs used in the manufacture of fabrics for the disputed period.

In conclusion, the Tribunal set aside the impugned order, allowed the appeal, and directed the original authority to grant the Modvat credit benefit to the appellants for the disputed period.