2005 (12) TMI 404 - AT - Central Excise

Summary

Issues:
- Demand of duty under Section 3A of the Central Excise Act
- Denial of Modvat credit
- Imposition of penalties
- Apportioning of capacity under the Compounded Levy Scheme

Analysis:
1. Demand of Duty under Section 3A: The appellants were facing a demand of duty amounting to Rs. 1,68,43,496 under Section 3A of the Central Excise Act. The learned Advocate for the appellants argued that since the production predominantly consisted of non-notified goods, they should be liable to pay duty under the normal procedure of Section 3 of the Central Excise Act, 1944. It was highlighted that the appellants had already paid a higher amount of duty through P.L.A., exceeding the demanded amount under Section 3A.

2. Denial of Modvat Credit: The appellants were also denied Modvat credit of Rs. 8,27,87,599. The Tribunal considered the submissions made on behalf of the appellants and found merit in their argument. Relying on the precedent set by the Tribunal's decision in a previous case, it was held that since the appellants were predominantly producing non-notified goods, they were entitled to discharge duty liability under the normal procedure of Section 3 of the Central Excise Act, 1944, and were eligible to claim Modvat credit on the inputs used.

3. Imposition of Penalties: In addition to the duty demands and denial of Modvat credit, penalties of Rs. 25 lakhs and Rs. 50 lakhs were imposed on the appellants. However, the Tribunal's decision to set aside the impugned order and allow the appeal resulted in consequential benefits to the appellants, indicating that the penalties were also overturned along with the main issues of duty demand and Modvat credit denial.

4. Apportioning of Capacity under the Compounded Levy Scheme: The issue of apportioning of capacity under the Compounded Levy Scheme was raised by the appellants, emphasizing the predominance of non-notified goods in their production. The Tribunal, following the precedent set in a previous case, ruled in favor of the appellants, allowing them to discharge duty liability under the normal procedure and avail Modvat credit, based on the nature of their manufacturing activities.

In conclusion, the Tribunal's decision favored the appellants, setting aside the demands of duty under Section 3A, denial of Modvat credit, and imposition of penalties. The judgment highlighted the importance of considering the nature of goods manufactured and upheld the appellants' right to pay duty under the normal procedure and claim Modvat credit accordingly.