2006 (8) TMI 508 - AT - Central Excise

Summary

Issues:
1. Utilization of Modvat credit for duty liability under an optional compounded levy scheme.

Analysis:
The appeal was against an Order-in-Appeal confirming duty liability under Section 3A and relevant rules from 16-12-1998. The appellant availed Modvat credit, but authorities directed them to reverse the credit balance for capital goods, leading to a recovery notice. The appellant challenged this in a writ petition, which was allowed by the High Court, allowing them to avail the credit. However, the compounded levy scheme was replaced with an optional scheme effective from 1st July 2001. The appellant utilized the credit to discharge duty under the new scheme, leading to the current demand and appeal.

The main contention was that the appellant correctly utilized the Modvat credit as directed by the High Court. However, the Tribunal noted that the new optional scheme had conditions, including not availing any credit of duty paid on inputs or capital goods. The Tribunal emphasized that the appellant, having opted for the new scheme before the High Court judgment, should have informed the court about the scheme change. The Tribunal found the clause in the notification clear that if opting for the scheme, the appellant cannot utilize the credit.

The Commissioner (Appeals) concluded that once the appellant opted for the new scheme, they were bound by its conditions, including not utilizing the credit for duty payment. Referring to a Supreme Court judgment, it was highlighted that enjoying benefits from both the compound levy and ad valorem scheme simultaneously is impermissible. The Tribunal also cited a decision where for those under the compound levy scheme, general excise provisions do not apply.

The Tribunal noted that the High Court allowed the appellant to avail, not utilize, the credit, and the judgment was based on the assumption that the compound levy scheme had been withdrawn. The appellant's reliance on another Tribunal decision was found unhelpful, as the notification clearly stated not availing any credit. Ultimately, the Tribunal dismissed the appeal, finding no reason to interfere with the impugned order based on the circumstances of the case.