2006 (4) TMI 402 - AT - Central Excise

Summary

Issues:
- Grant of Modvat credit on 'protective coatings'
- Non-levy of interest on denied Modvat credit
- Non-imposition of penalty under Rule 173Q

Analysis:
1. Grant of Modvat credit on 'protective coatings': The appeal was filed against the order passed by the Commissioner (Appeals) regarding the grant of Modvat credit on 'protective coatings' to the respondents. The impugned order allowed Modvat credit on protective coatings due to an anomaly in the operative part of the order. Both parties agreed to insert 'protective coatings' in the conclusive sentence to remedy the anomaly. Consequently, the conclusive sentence of the order was modified to allow Modvat on all items except light fittings and protective coatings.

2. Non-levy of interest on denied Modvat credit: The show cause notice did not invoke Section 11AA of the Central Excise Act for levying interest on inadmissible Modvat credit amounts. The original authority held the assessee liable for interest under Section 11AA, but the Commissioner (Appeals) vacated the demand citing it was beyond the notice's scope. The appellant argued that interest is automatic when duty liability is determined under Section 11A, supported by a Supreme Court judgment. However, after considering Section 11AA, it was found that the provisions do not apply to cases where duty became payable after the Finance Bill, 2001 received assent. As the duty became payable in 2002, the demand for interest was rejected.

3. Non-imposition of penalty under Rule 173Q: The penalty imposed by the original authority was vacated by the Commissioner (Appeals). However, the appeal memorandum did not provide any grounds to support the plea for penalty imposition. Therefore, the plea for penalty was deemed to fail.

In conclusion, the appeal was dismissed except for the issue regarding 'protective coatings,' where the modification in the order allowed Modvat credit on all items except light fittings and protective coatings. The demand for interest on denied Modvat credit was rejected based on the inapplicability of Section 11AA, and the plea for penalty imposition failed due to lack of supporting grounds in the appeal memorandum.