2006 (5) TMI 352 - AT - Central Excise

Summary

Issues:
Violation of conditions for availing partial exemption under Notification 10/02-C.E., dt. 1-3-02 by debiting duty from Cenvat credit account instead of paying "in cash or through account current."

Detailed Analysis:

Issue 1: Violation of Exemption Conditions
During April'02 to Feb'03, the appellant, a multi-product company, manufactured water pump sets eligible for partial exemption under Notification 10/02-C.E., dt. 1-3-02. The notification required duty payment at 4% instead of the normal 16% if no Cenvat credit was taken on inputs for water pump sets and duty was paid "in cash or through account current." The appellant mistakenly paid duty on pump sets from the Cenvat credit account instead of complying with the payment condition specified in the notification.

Issue 2: Interpretation of Payment Conditions
The appellant argued that debiting duty from the Cenvat account should be considered as fulfilling the condition of payment "in account current," citing a previous judgment equating Cenvat account to account current. Additionally, the appellant claimed the Cenvat account debit was a clerical error and highlighted that other products were paid duty from the current account (PLA) despite being eligible for Cenvat credit, emphasizing a need for a recast of accounts.

Issue 3: Precedents and Legal Interpretation
The appellant referenced judgments involving irregular availment of Modvat credit, asserting that reversing ineligible credits to neutralize their effect satisfied exemption conditions. Specifically, reliance was placed on a decision by the Allahabad High Court discussing Supreme Court and Tribunal pronouncements on similar matters.

Issue 4: Compliance with Exemption Conditions
The Departmental Representative argued that non-availing Cenvat credit on inputs and paying duty "in cash or account current" were essential conditions for availing the exemption. Failure to adhere to either condition would render the appellant ineligible for the exemption, emphasizing strict compliance with the notification requirements.

Judgment:
The Tribunal acknowledged the appellant's contentions, noting that errors in debiting duty from the Cenvat credit account and current account did not involve payments from prohibited sources but were inadvertent mistakes. The Tribunal found that the appellant did not violate the condition of not taking Cenvat credit on inputs, emphasizing the need for a mere recast of accounts due to the errors made. Relying on precedents and legal interpretations, the Tribunal concluded that denying the exemption or demanding duty at the non-exempted rate was unwarranted. Consequently, the appeal was allowed, granting consequential relief to the appellant as per the decision.