2006 (6) TMI 371 - AT - Central Excise

Summary

Issues:
- Appeal by Revenue against Commissioner (Appeals) order granting deemed Modvat credit to respondents under Notification No. 29/96-CE (NT).
- Dispute over additional duty paid on processed cotton fabrics at depot and availment of deemed credit.
- Original authority disallowed deemed credits and imposed penalties, leading to appeals by assessee.
- Interpretation of Notification No. 29/96-C.E. (N.T.) regarding availability of deemed Modvat credit on inputs and final products.
- Adjudication on whether deemed credit on differential duty paid at depot is admissible to the respondents.

Analysis:
The case involved appeals by the Revenue challenging the order of the Commissioner (Appeals) granting deemed Modvat credit to the respondents under Notification No. 29/96-CE (NT) for differential duty paid on processed cotton fabrics at the time of clearance from their depots. The respondents cleared denim fabrics to their own division/depot, paying duty and availing deemed credit. Subsequently, when goods were cleared from the depot at a higher price, additional duty was paid, objected to by the department. Show cause notices were issued for recovery of the "extra" credit taken. The original authority disallowed deemed credits on additional duty and imposed penalties, leading to appeals by the assessee, which were allowed by the Commissioner (Appeals).

The Notification declared inputs and final products eligible for deemed Modvat credit, with duty deemed paid on inputs. The duty payable on final products allowed deemed credit equivalent to a percentage of the duty paid. The respondents were entitled to such credit on the duty paid on the final product, including the additional duty paid at the depot. The timing of duty payment (factory vs. depot) was deemed immaterial; what mattered was the total duty paid on the goods. As the appropriate duty was paid by the assessee, they were eligible for deemed Modvat credit as per the Notification. The lower appellate authority rightly allowed the benefit to the respondents, as there was no dispute regarding their eligibility for the benefit.

In conclusion, the appeals of the department were dismissed, affirming the decision of the lower appellate authority to grant deemed Modvat credit to the respondents under Notification No. 29/96-CE (NT) for the duty paid on the final product, including the additional duty paid at the depot.