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2005 (4) TMI 440 - AT - Central Excise
Issues:
1. Applicability of Cenvat credit on Shrink Sleeves used in the manufacture of the final product. 2. Denial of Cenvat credit on printed labels attracting Nil rate of duty. 3. Imposition of penalty under Section 11AC and Rule 13(2) of the Cenvat Credit Rules. Analysis: The case involved an application under Section 35F of the Central Excise Act, 1944 seeking waiver of pre-deposit amount and stay on its recovery by the appellants engaged in manufacturing Talcum Powder. The appellants availed Modvat credit facility under Rule 57AB of the Central Excise Rules, 1944. It was discovered that the supplier manufacturer had paid duty on Shrink Sleeves under Chapter heading 3920.00, which was deemed to be classifiable under Chapter heading 4901.90 attracting Nil duty. Consequently, the appellants were found to have wrongly availed Modvat/Cenvat credit on exempted printed labels, leading to a Show Cause Notice for recovery of Rs. 55,11,141/- and imposition of penalties under Section 11AC. The primary issue revolved around the denial of Cenvat credit on Shrink Sleeves used in the final product's manufacture due to the classification of the input as printed plastic film labels chargeable to Nil rate of duty under Chapter Sub-heading 4901.90. The Commissioner, Central Excise & Customs, Vapi, upheld the demand, imposing penalties under Section 11AC and Rule 13(2) of the Cenvat Credit Rules, 2001/2002 amounting to Rs. 34,93,398/- and Rs. 20,17,743/- respectively. In defense, the appellants cited a precedent from the Tribunal in the case of M/s. Beta Cosmetics to support their claim. Relying on this decision, the appellants were granted a full waiver of the pre-deposit amount, and the recovery was stayed. Consequently, the stay application was disposed of accordingly. The judgment highlights the importance of correct classification and utilization of Cenvat credit in compliance with the Central Excise Act, emphasizing the consequences of erroneous availing of credit on exempted inputs.
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