2008 (7) TMI 666 - AT - Central Excise

Summary

Issues:
1. Application for dispensing with pre-deposit of duty amount erroneously granted as rebate of countervailing duty (CVD).
2. Interpretation of Notification No. 21/2004 and subsequent amendment regarding rebate of CVD.
3. Applicability of Modvat credit and refund in case of exported final products exempted from central excise duty.

Analysis:
1. The case involved an application to dispense with the pre-deposit of duty amount of Rs. 26,00,044/-, which was erroneously granted as rebate of CVD paid by the appellant during the importation of raw materials used in manufacturing utensils later exported by them. The refund claim was initially granted under Notification No. 21/2004 but was later found to be in error, leading to proceedings for recovery of the refunded amount.

2. The appellant's advocate argued that an amendment to the explanation of Notification No. 21/2004 through Notification No. 12/2007 included CVD as a duty entitled to rebate, effective from 1-3-2007. The advocate contended that this amendment should be considered retrospective, allowing the appellant to claim CVD either as rebate or as a refund of Modvat credit. Reference was made to a Tribunal decision and a High Court decision supporting this argument.

3. The respondent's representative countered by stating that the amendment specifying CVD for rebate under Notification No. 21/2004 from 1-3-2007 could not be applied retrospectively. It was argued that the High Court decision cited by the appellant's advocate was not directly applicable as the appellant's final product was exempt from central excise duty, affecting the availability of Modvat credit for CVD.

4. The Tribunal found that the amendment to Notification No. 21/2004 adding CVD to the specified duties for rebate from 1-3-2007 could not be considered retrospective. The explanation in the original notification did not include CVD, and the subsequent amendment clarified the position without ambiguity, indicating legislative intent but not retroactive application.

5. Regarding the Modvat credit and refund issue, the Tribunal noted that the matter was contentious and arguable. The Tribunal observed that the High Court decision cited by the appellant was not entirely applicable since the appellant's final product was exempt from duty, raising doubts about the entitlement to Modvat credit for CVD.

6. Consequently, the Tribunal directed the appellant to deposit 50% of the confirmed duty demand within twelve weeks, considering any prior payments made by the appellant. The compliance verification was scheduled for a later date.

This detailed analysis covers the issues raised in the judgment, including the interpretation of relevant notifications and the applicability of Modvat credit in the context of the appellant's case.