2008 (4) TMI 566 - AT - Central Excise

Summary

Issues:
1. Duty liability on packing material due to exemption on finished goods.
2. Refund of unutilized credit amount in cash.
3. Jurisdiction of the Settlement Commission to vary duty amount payable.

Analysis:
1. The case involved a situation where the Appellants received inputs from their principal manufacturer for manufacturing packing materials. After job-work, the packing material was returned to the principal manufacturer without the Appellants taking credit on the inputs or paying duty on the packing material, as the principal manufacturer was responsible for duty on finished goods. However, when it was discovered that the principal manufacturer did not pay duty on exempt finished goods for a period, duty demand on packing material was imposed on the Appellants due to the conditional exemption for job workers. The Appellants approached the Settlement Commission to settle the duty demand arising from this situation.

2. The Appellants requested the Settlement Commission to quantify duty liability considering the credit available to them for inputs. However, the Commission quantified the duty amount without factoring in the credit, leading to the Appellants having to make a higher cash deposit. Subsequently, the jurisdictional Authorities allowed a Cenvat credit, but the Appellants were denied a cash refund of the unutilized credit due to the absence of a specific legal provision for such refunds. The Appellants argued that the credit was now unusable as they were in the exempted small scale sector and could not utilize it for duty payment on finished goods.

3. The Tribunal found that there was no legal provision for a cash refund of unutilized credit, except for duty paid on inputs used in export goods. While dismissing the appeal for a cash refund, the Tribunal permitted the Appellants to approach the Settlement Commission again. The Commission was advised to reconsider the duty amount, taking into account the available Cenvat credit, which could result in a re-determination of the net amount payable by the Appellants towards their duty liability. If such a re-determination occurred, the Appellants would be eligible for a cash refund of excess duty paid. The Tribunal emphasized that the Settlement Commission should have the power to vary its earlier order to ensure justice, especially in cases where no appeal mechanism exists against its decisions.

In conclusion, the appeal was disposed of with the Appellants being allowed to seek a re-determination of the duty amount by the Settlement Commission, potentially leading to a refund of excess duty paid if justified by the revised calculation.