2008 (4) TMI 619 - AT - Central Excise

Summary

Issues:
1. Duty demand and personal penalty imposition for denial of Modvat credit.
2. Interpretation of specified final product for deemed credit availed.

Analysis:

Issue 1:
The judgment addresses the duty demand of Rs. 53,47,765/- against the appellant, along with a personal penalty of Rs. 15 lakhs, due to the denial of the benefit of Modvat credit. The appellant utilized Modvat credit for inputs used in manufacturing intermediate processed fabric, which was then used in manufacturing inter-lining coated fabric. The duty demand was based on the exemption of intermediate products from duty payment under Notification No. 67/95. The Tribunal referred to precedents set by the Mumbai High Court and the Supreme Court, emphasizing that if the wrongly availed credit is equivalent to the duty paid by not availing exemption, it is revenue-neutral and cannot be sustained. The original adjudicating authority dropped the demand in line with these judgments. However, the Commissioner (Appeals) set aside this decision, contending that the final product did not fall under the specified category for deemed credit availed.

Issue 2:
The Tribunal disagreed with the Commissioner (Appeals) regarding the interpretation of the specified final product for deemed credit availed. The appellant had availed credit under Notification No. 29/96 for discharging duty liability on bleached fabrics classified under Chapter 52, a specified chapter for final products. The credit was not used for the duty on the final product, cotton inter-lining powder coated fabric of Chapter 59. The Tribunal held that the absence of Chapter 59 as a specified final product did not affect the validity of the credit availed for Chapter 52 products. Consequently, the Tribunal set aside the impugned order, allowing the appeal and disposing of the stay petition.

In conclusion, the judgment clarifies the application of Modvat credit, the impact of specified final products on credit utilization, and the importance of precedent decisions in determining duty demands and penalties.