2005 (6) TMI 367 - AT - Central Excise

Summary

Issues:
1. Duty demand on manufacturing of 'fin tubes' and 'bend tubes' without payment of duty.
2. Duty demand on improper accounting of raw materials.

Analysis:

Issue 1: Duty demand on manufacturing of 'fin tubes' and 'bend tubes' without payment of duty:
The appellant, a manufacturer of parts of steam turbine, electric motors, generators, etc., contested the duty demand on two grounds. Firstly, the appellant argued that the demand was time-barred as it was raised after a significant delay from the alleged period of manufacture. The appellant claimed that all repair work undertaken, including the use of 'fin tubes' and 'bend tubes,' was duly intimated to and permitted by the excise authorities. The appellant highlighted that the department was aware of the repair activities through work orders and the reversal of Modvat credit on inputs used for repairs. The appellant asserted that the department should have raised the demand within the normal period if it deemed the repair activities as dutiable. The appellant contended that the repair activities did not involve suppression of facts with intent to evade duty.

In contrast, the Revenue authorities argued that specific information about the manufacture of 'fin tubes' and 'bend tubes' was not provided to them. They relied on legal judgments to support their stance that without such information, they could not have known about the manufacturing activities. However, the Tribunal observed that the department had knowledge of the repair activities through work orders and concurrent reversal of Modvat credit on inputs used for repairs. The Tribunal noted doubts regarding whether the repair activities constituted manufacturing and emphasized that no manufacturing account was requested for the converted pipes. Consequently, the Tribunal accepted the appellant's argument that there was no suppression of facts with intent to evade duty, leading to the conclusion that the demands were not sustainable.

Issue 2: Duty demand on improper accounting of raw materials:
The second demand pertained to the improper accounting of raw materials based on the revaluation of inputs received under the Modvat Scheme. The appellant argued that the revaluation of assets and materials by a company did not affect Cenvat credit, as the credit was determined by the duty paid on the inputs. The appellant contended that subsequent revaluation of input stock had no impact on the credit available under the Modvat or Cenvat credit scheme.

The Tribunal agreed with the appellant's submission, stating that under both the Modvat and Cenvat credit schemes, the credit available was equivalent to the actual duty paid on the input. The Tribunal emphasized that revaluation of inputs by a manufacturer for various purposes did not affect the credit available under the schemes. Consequently, the Tribunal held that the demand related to improper accounting of raw materials was also not sustainable.

In conclusion, the Tribunal found that both demands were not sustainable. As a result, the penalties and interest associated with the demands were also deemed unsustainable. Therefore, the impugned order was set aside, and the appeals were allowed in favor of the appellant, granting consequential relief.