2009 (6) TMI 738 - AT - Central Excise

Summary

Issues:
1. Classification and exemption under Notification No. 144/89-C.E.
2. Reversal of Modvat credit on inputs.
3. Validity of the order passed by the lower appellate authority.

Classification and Exemption under Notification No. 144/89-C.E.:
The case involved the appellant, engaged in manufacturing excisable products, with one product falling under exemption Notification No. 144/89-C.E. The appellant initially paid duty on this product between 19-5-1989 and 1-10-1989 but later opted for the exemption scheme from 1.10.1989 onwards. The question arose regarding the reversal of Modvat credit on inputs related to the final product covered by the notification. The original authority confirmed demands of duty against the appellant, leading to the present appeal.

Reversal of Modvat Credit on Inputs:
The issue of whether the appellant should reverse the Modvat credit already taken in their RG23A Part-II account for inputs present in stock on 1-10-1989, related to the final product under the exemption notification, was central to the case. The lower appellate authority's order was set aside due to various reasons. The appellant relied on the Supreme Court's judgment in Dai Ichi Karkaria case, emphasizing that the credit taken by the manufacturer is available without limitation unless the manufacturer chooses not to use the raw material in the excisable product. The appellate authority's failure to consider this aspect and the application of Rule 9 of the Cenvat Credit Rules, 2001, dating back to 1-10-1989, were key reasons for overturning the lower authority's decision.

Validity of the Order Passed by the Lower Appellate Authority:
The order passed by the lower appellate authority was deemed liable to be set aside for multiple reasons. The Commissioner (Appeals) failed to properly consider the appellant's case and the relevant legal principles, leading to a lack of application of mind in the decision-making process. The judgment highlighted the need for a fresh order by the lower appellate authority, providing the appellant with a reasonable opportunity to present their case. Ultimately, the appeal was allowed by remand, emphasizing the importance of a fair and thorough review of the appellant's appeal against the order of adjudication.