2006 (2) TMI 466 - AT - Central Excise

Demand duty- penalty - dyed polyester Yarn falling under SH 5509.22 - denial of the benefit of Notification No. 5/99-C.E - HELD THAT - In the case of Franco Italian Co. Pvt. Ltd. 2000 (8) TMI 109 - CEGAT COURT NO. III NEW DELHI the Tribunal s Larger Bench allowed SSI benefit under Notification No. 1/93-C.E. to the assessee in respect of specified goods subject to the condition that the Modvat credit taken on the inputs utilized in the manufacture of such specified goods be reversed. This view was followed with approval by the Allahabad High Court in the case of Hello Minerals Water (P) Ltd. 2004 (7) TMI 98 - ALLAHABAD HIGH COURT the benefit of Notification No. 452/86-C.E. was allowed to the assessee subject to reversal of credit on inputs. In the instant case also we are of the considered view that if the payment by the appellants is found to have compensated the availment and utilization of input duty credit and capital goods credit for the periods 1997-98 1998-99 the benefit of Notification No. 5/99-C.E. can be allowed to them in respect of the finished goods cleared during the period of dispute. In such a context any particular word or expression used in Condition No. 21 of the notification does not arise for interpretation. Thus following the precedents cited by learned counsel we set aside the impugned order and allow this appeal. However it is made clear that it is up to the adjudicating authority to verify the relevant records to satisfy itself that the above payment made on 10-1-2005 by the assessee is adequate to compensate their availment and utilization of input duty credit and capital goods credit for 1997-98 1998-99.

Summary

Issues:
Appeal against demand of duty and penalty due to denial of benefit of Notification No. 5/99-C.E. for dyed polyester yarn under specific conditions.

Analysis:
1. The appeal challenged a demand for duty and penalty based on the denial of benefits under Notification No. 5/99-C.E. for dyed polyester yarn. The condition in question, Condition No. 21, required no availing of credit under specific rules during the manufacturing process. The Department alleged non-compliance due to availing Modvat credit on inputs and capital goods in previous years, leading to the demand. The notice invoked an extended period of limitation based on misdeclaration and fraud allegations. The Commissioner upheld these claims in the impugned order.

2. The appellant's argument centered on interpreting the condition to mean that the credit availed in previous years should not impact the current situation. The appellant contended that the payment made before the appeal filing date should nullify any breach of conditions. Citing relevant case laws, the appellant sought equity in applying the notification's benefits despite past credit availing. The Senior Advocate emphasized that the payment made should rectify any non-compliance with Condition No. 21(iii) of the notification. The Senior DR, however, supported the Commissioner's findings.

3. Upon careful consideration, the Tribunal found merit in the appellant's argument. The payment made by the appellant to compensate for past credit availing aligned with precedents where such actions restored the benefit of notifications. Citing cases like Franco Italian Co. Pvt. Ltd. and Bharath Earth Movers Ltd., the Tribunal concluded that the payment made should reinstate the appellant's right to claim the notification's benefits for the disputed period. The Tribunal emphasized that the specific interpretation of Condition No. 21 was unnecessary in this context.

4. Consequently, the Tribunal set aside the impugned order and allowed the appeal, directing the adjudicating authority to verify if the payment made adequately compensated for the past credit availing. The decision was pronounced in open Court on 28-2-2006, emphasizing the importance of verifying the records to ensure compliance with the conditions for benefit eligibility.