2007 (7) TMI 488 - AT - Central Excise

Summary

Issues:
Imposition of penalty for wrongly availing deemed credit on bed sheets as inputs.

Analysis:
The appeal was filed against an order imposing a demand of Rs. 3,00,360/- and a penalty of Rs. 75,000/- for wrongly availing deemed credit. The main contention of the appellant was regarding the imposition of the penalty. The appellant had availed deemed credit in respect of bed sheets as inputs and paid duty at a higher value during clearance, which was not disputed. The revenue issued a show cause notice for denying the benefit of deemed credit, stating that the appellants were not entitled to it as they were not undertaking any manufacturing process on the bed sheets for which the credit was availed.

The revenue argued that deemed credit was admissible only for inputs used in the manufacture of goods to be cleared on payment of duty. As the appellants were not engaging in any manufacturing process related to the bed sheets for which deemed credit was availed, the credit was rightfully denied, and penal action was deemed necessary. However, the appellants maintained that since they were not undertaking any manufacturing process, they should not be liable to pay duty, despite having availed the deemed credit and paid duty at a higher value.

The tribunal considered the facts and concluded that although the appellants had availed the deemed credit and paid duty at a higher value, they were not entitled to the credit as they were not involved in any manufacturing process related to the bed sheets. Consequently, the tribunal set aside the penalty imposed on the appellant but confirmed the demand. The decision was based on the fact that although the appellants had paid duty, their activities did not amount to manufacturing, making them ineligible for the deemed credit but not liable for penalty.

In summary, the tribunal ruled in favor of the appellant regarding the penalty imposed for wrongly availing deemed credit on bed sheets as inputs. The appellants were found not liable for penalty as they were not engaged in any manufacturing process related to the bed sheets, despite having paid duty at a higher value. The demand was confirmed, but the penalty was set aside based on the lack of manufacturing activity by the appellants.