2009 (12) TMI 821 - AT - Central Excise

Summary

Issues involved:
Classification of final products under different chapters of CETA, 1985, eligibility for Modvat credit, verification of documents, legality of demanding differential duty without issuing a show cause notice, retrospective allowance of Modvat credit, adjustment of duty payable under re-classification.

Detailed Analysis:

1. Classification of Final Products and Modvat Credit Eligibility:
The dispute revolves around the classification of final products under Chapters 54 and 63 of CETA, 1985, and the subsequent claim for classification under Chapter 39 to avail Modvat credit. The Hon'ble High Court upheld the re-classification under Chapter 39, subject to verification of documents for granting Modvat credit. The appellants sought a total credit of Rs. 32,34,615, which was partially allowed by the Deputy Commissioner initially. The matter underwent multiple reconsiderations and appeals, leading to the current appeal against the Commissioner (Appeals) order disallowing a portion of the credit.

2. Legality of Demanding Differential Duty without Show Cause Notice:
The learned Advocate for the appellants argued that the Commissioner's decision to disallow a portion of the credit without issuing a show cause notice for demanding differential duty on finished products was not legal. Citing the decision in Metal Forgings v. UOI and Voltas Ltd. v. C.C.E., the Advocate contended that any recovery should be preceded by a show cause notice under Section 11A of the law.

3. Retrospective Allowance of Modvat Credit and Adjustment of Duty Payable:
The Tribunal noted that the re-classification directed by the Hon'ble High Court allowed for retrospective granting of Modvat credit based on document verification. The issue at hand was whether the differential duty payable under the re-classification should be adjusted. The Tribunal drew an analogy to situations where past demands were confirmed, but retrospective benefits like Modvat credit were extended subject to document verification, emphasizing the need to give full effect to the re-classification as directed by the High Court.

4. Conclusion:
After considering submissions from both sides, the Tribunal found no infirmity in the Commissioner (Appeals) order. The Tribunal upheld the decision to allow Modvat credit to the extent of Rs. 28,35,524, in line with the re-classification directed by the High Court. The appeal was subsequently rejected based on the above analysis and legal considerations.