2009 (5) TMI 730 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit and penalty imposition by the Commissioner (Appeals).
2. Interpretation of Notification No. 21/2000-C.E. (N.T.) regarding deemed credit for re-rolled products.
3. Applicability of MF (DR) Circular No. 522/18/2000-CX on availing Cenvat credit.

Analysis:
1. The Commissioner (Appeals) denied Modvat credit of Rs. 1,26,950/- and imposed a penalty of Rs. 25,000/- on the appellants, M/s. Johnson Lifts Pvt. Ltd. The denial was based on the grounds that the inputs were received beyond the period when Notification No. 21/2000-C.E. (N.T.) was in effect. However, the Tribunal found that the notification did not specify such a condition. The critical requirement for deemed credit was that the inputs should have suffered duty under Section 3A of the Central Excise Act. The Tribunal noted that there was no evidence that the inputs did not meet this condition or that the credit was not taken within the stipulated six months from the date of the invoices. Therefore, the Tribunal held that the denial of credit and penalty imposition were unjustified, leading to the vacating of the impugned order and allowing the appeal.

2. Notification No. 21/2000-C.E. (N.T.) provided for deemed credit at the rate of 12% of the invoice value for re-rolled products received by manufacturers directly from units under the compounded levy scheme. The notification was effective from 1-4-2000 to 30-4-2000. The lower authorities contended that deemed credit was not available for inputs received after the cessation of the notification. However, the appellants argued that the notification did not prohibit availing deemed credit for inputs received beyond 30-4-2000. The Tribunal agreed with the appellants, emphasizing that the key condition was that the inputs should have undergone duty under Section 3A of the Act. Since there was no evidence to the contrary, the denial of credit based on the timeline was deemed incorrect.

3. The appellants relied on MF (DR) Circular No. 522/18/2000-CX, which allowed Cenvat credit for stocks of inputs with re-rolling mills and induction furnace units as of 1-4-2000. The circular permitted the clearance of finished goods without duty payment and granted deemed credit to users of such stock. The appellants contended that the notification did not restrict manufacturers from availing deemed credit on inputs received post 30-4-2000. The Tribunal considered this argument, along with the provisions for availing Cenvat credit within six months of invoice issuance, and concluded that the denial of credit and penalty imposition lacked merit. Consequently, the impugned order was set aside, and the appeal was allowed.