2008 (5) TMI 558 - AT - Central Excise

Demand - extended period of Limitation - Cenvat/Modvat credit - inputs used in the manufacture of Crayplas Compound - Interest - Relevant date of effect

Summary

Issues:
1. Barred by limitation - Demand of Rs. 35,17,492.63 raised vide show cause notice dated 31-3-95.
2. Modvat credit eligibility for Crayplas Compound.
3. Applicability of interest under Section 11AB of the Central Excise Act, 1944.
4. Extended period of limitation invocable.
5. Denial of Modvat credit in case of other show cause notices.

Analysis:
1. The appellants contested the demand raised by the Commissioner, arguing that the demand for Rs. 35,17,492.63 from 1-4-90 to 28-2-95 was barred by limitation. The Tribunal found that the extended period of five years was applicable, as the appellants failed to declare the manufacture and clearance of Crayplas Compound intentionally, leading to a wilful suppression of information. However, the demand for the period from 4-4-94 to 30-9-94 was held to be barred by limitation, while for the period from 1-10-94 to 28-2-95 was within time and sustainable.

2. Regarding Modvat credit eligibility, the Commissioner initially denied the credit based on wilful misdeclaration and suppression of facts by the appellants. However, the Tribunal disagreed, stating that the provision of Rule 57E of Central Excise Rules was not applicable as it pertained to final products like Crayplas Compound, not inputs. Therefore, the appellants were entitled to Modvat credit on inputs used in manufacturing the compound.

3. The issue of interest under Section 11AB was also addressed. The Tribunal ruled that no interest was payable for the demand covered by the show cause notice dated 31-3-95, relating to the period from 1-4-90 to 28-2-95, as Section 11AB came into effect from 28-9-1996.

4. The Tribunal analyzed the invocation of the extended period of limitation and held it to be rightly invocable in the case, considering the intentional misdeclaration and suppression of information by the appellants. The duty demand for the relevant periods was upheld based on this finding.

5. Lastly, the denial of Modvat credit in other show cause notices was challenged by the appellants. The Tribunal disagreed with the Commissioner's reasoning, stating that the appellants should be allowed to avail Modvat credit on inputs used in manufacturing final products, even if they had not complied with the statutory provisions at the time of input receipt, as long as they could provide duty paying documents.

In conclusion, the Tribunal directed the Commissioner to rework the duty demand after extending Modvat credit to the appellants, with the penalty to be determined accordingly. The impugned order was modified, and the appeal was disposed of accordingly.