2006 (7) TMI 438 - AT - Central Excise

Summary

Issues:
- Demand of duty on removal of cotton yarn without payment
- Applicability of Rule 3(4) of Cenvat Credit Rules, 2002
- Claim of goods being cleared for further process and export
- Imposition of penalty under Section 11AC
- Relevance of case laws cited by the appellant
- Examination of clearances under Notification No. 43/01
- Discrepancy in quantity of cotton yarn covered by certificate

Analysis:
The judgment deals with a case where a demand of duty, penalty, and interest were imposed on an appellant for removing cotton yarn without payment of duty. The lower authorities upheld the findings that the appellant had removed the goods without subjecting them to any process, violating Rule 3(4) of the Cenvat Credit Rules, 2002. The appellant argued that the goods were cleared for further processing and export, citing various submissions and case laws. The appellant requested a remand to examine if the goods were cleared in accordance with Notification No. 43/01 and converted into fabrics for export.

The Revenue contended that the case laws cited by the appellant were not relevant as they covered clearances for export under bond, whereas in this case, clearances were to another unit. The Revenue argued that the appellant used a device to transfer Modvat credit from their sister unit. Regarding the penalty under Section 11AC, it was argued that if credit was utilized wrongly with the intention to evade duty, the penalty was justified under Rule 13 of the Cenvat Credit Rules.

The judge observed that the lower authorities did not consider the appellant's claim that the goods were cleared for conversion into fabrics for export. The judge noted discrepancies in the quantity of cotton yarn covered by the certificate provided. The judgment set aside the impugned order and allowed the appeal by way of remand, directing the original authority to re-examine the case and provide the appellants with an opportunity to present their case adequately.