2006 (4) TMI 389 - AT - Central Excise

Summary

Issues:
1. Time-barred demand regarding Modvat credit on filter pads.
2. Liability to reverse Modvat credit due to exemption of final product.
3. Maintainability of penalty in the absence of duty demands.

Analysis:
1. The first issue pertains to the time-barred demand concerning Modvat credit on filter pads. The appellant argued that the demand is beyond the normal time limit stipulated in Rule 57-I of the Central Excise Rules. The Departmental Representative contended that this objection was not raised before the lower authorities. The Tribunal found merit in the appellant's contention, stating that limitation is a legal issue that can be raised at any stage. As the demand was raised beyond the six-month time limit, the demand related to Modvat credit on filter pads was set aside on the ground of limitation.

2. The second issue revolves around the liability to reverse Modvat credit due to the exemption of the final product. The appellant argued that there was no unutilized Modvat credit at the time of exemption, and since the credit was used when the product was dutiable, there was no wrongful availment requiring return of the credit. The appellant relied on a Tribunal decision in support of their stance. On the other hand, the Departmental Representative cited a different Tribunal decision. The Tribunal sided with the appellant, stating that there was no legal provision for returning correctly taken and utilized credit. This position was supported by a Supreme Court judgment, and therefore, the demand related to credit on inputs and finished goods was deemed not maintainable.

3. The final issue concerns the penalty in the absence of duty demands. It was held that the penalty cannot stand without any duty demands. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief to the appellants. The judgment was pronounced in open court on the 4th of April, 2006.