2005 (2) TMI 712 - AT - Central Excise

Summary

Issues:
1. Reversal of Modvat/Cenvat credit on inputs used in the manufacture of exempted products.
2. Show Cause Notice issued by the Commissioner disallowing Modvat/Cenvat credit and imposing penalties.
3. Applicability of Section 11AC, reversal of credit, and penalties imposed.
4. Appeal on interest and penalties imposed on the Excise Clerk.

Analysis:

1. The appellants engaged in manufacturing paper products availed Modvat credit on inputs used in the manufacture of exempted products like newsprint. They reversed the credit for inputs used in the manufacture of "De-ink pulp plant" and bagasse pulp subsequently used in duty exempt newsprint. Additionally, credit for core pipes used in newsprint manufacture was also reversed.

2. The Commissioner issued a Show Cause Notice directing the reversal of Modvat/Cenvat credit on inputs used in the manufacture of newsprint attracting nil duty rates. The Commissioner disallowed significant amounts of credit, imposed penalties under Rule 57-I(4) and Rule 57AH(2) of the Central Excise Rules, demanded interest under Section 11AB, and imposed penalties under Section 11AC on the appellant and the Excise Manager.

3. The Tribunal considered the appellants' reliance on relevant legal decisions and found their reversal of credit due to a change in technology to be justified. The Tribunal noted the differences in interpretation regarding Section 11AC but ultimately set aside the penalties based on the bona fides of the appellants and the payment of due amounts. The penalties were set aside based on the non-availment of credit and the absence of misdeclaration or non-declaration.

4. The advocate for the appellants did not press for an appeal on interest, which was confirmed. The Tribunal also set aside the penalty imposed on the Excise Clerk due to the findings on penalties imposed on the assessee and the absence of confiscation liability. The appeals were disposed of accordingly, with the penalties set aside based on the Tribunal's analysis and conclusions.

This detailed analysis of the judgment highlights the issues of Modvat/Cenvat credit reversal, penalties imposed, applicability of relevant legal provisions, and the final disposition of the appeals by the Tribunal.