1996 (3) TMI 508 - AT - Central Excise

Summary

Issues Involved:
1. Whether the goods exported and those cleared for home consumption were "similar" products.
2. Whether the demand for duty due to the alleged wrong utilization of Modvat credit was sustainable.
3. Whether the appellants were entitled to a refund of the Modvat credit if the credit utilization was found improper.

Summary of Judgment:

Issue 1: Similarity of Goods
The appellants argued that the chassis fitted with engines, classified under sub-heading Nos. 8706.20 and 8706.40, and motor vehicles under other sub-headings of Chapter 87 were "similar" products. The Collector (Appeals) and the Judicial Member held that these were not similar products, emphasizing that chassis and fully built motor vehicles are distinct under the Central Excise Tariff Act. The Technical Member, however, opined that both items are "motor vehicles" in common parlance and should be considered similar, especially given the beneficial nature of the Modvat scheme. The Technical Member's view was supported by the majority, which found that the term "similar" should be interpreted broadly to include all motor vehicles under Chapter 87.

Issue 2: Sustainability of Duty Demand
The appellants contended that they had correctly utilized the Modvat credit for payment of duty on motor vehicles cleared for home consumption. The Collector (Appeals) disagreed, leading to the demand for duty. The Tribunal, by majority, concluded that since the goods exported and those cleared for home consumption were "similar," the utilization of Modvat credit was proper. Thus, the demand for duty was not sustainable.

Issue 3: Entitlement to Refund
The appellants argued that if the credit utilization was found improper, they should be entitled to a refund of the Modvat credit. The Collector (Appeals) did not address this issue, stating it was not raised before him. The Judicial Member held that the refund claim was barred by limitation under Section 11B of the Central Excises and Salt Act, 1944. The Technical Member, however, found that the claim for refund was valid as the period of limitation had not commenced due to the ongoing dispute. The majority agreed with the Technical Member, holding that the refund claim was not time-barred and should be considered if the credit utilization was disallowed.

Conclusion:
The Tribunal, by majority, held that the demand of duty was not sustainable as the goods exported and those cleared for home consumption were "similar" products. Consequently, the appeal was allowed, and the appellants were not liable for the demanded duty. The question of refund was rendered moot by this decision.