2013 (11) TMI 1529 - AT - Central Excise

Denial of CENVAT Credit - Payment of duty using lapsed credit - Held that - impugned demands pertain to the period prior to 1-3-1997 and the credit was sought to be lapsed as on 1-3-1997. If the demands had been confirmed earlier that is prior to 1-3-1997 the appellant would have been eligible for setting off the credit against the duty liability. Merely because the demand has been confirmed subsequently the appellant cannot be denied the utilisation of lapsed credit which had accrued to them prior to 1-3-1997. - appellant had a closing balance of Rs. 2, 46, 90, 647/- as on 28-2-1997 and the credit pertaining to raw materials semi-processed goods and finished goods amounted to Rs. 1, 11, 49, 513/- and the credit allowed to be lapsed on 1-3-1997 was Rs. 1, 35, 41, 134/-. As against this the differential duty liable to be paid by the appellant is Rs. 98, 24, 993/- plus Rs. 33, 62, 675/- totalling Rs. 1, 31, 87, 668/-. Thus the demand against the assessee is less than the credit allowed to be lapsed and the lapsed credit could have been utilised for discharge of duty liability. We also notice that there is an error in the computation of demand of Rs. 1, 89, 10, 961/- inasmuch as the demand required to be confirmed was for the period May 1996 to July 1996 whereas the same has been computed for the period up to August 1996. If necessary correction is done then the demand would come down by Rs. 5, 84, 190/-. - Decided in favour of assessee.

Summary

Issues:
1. Classification of Animal Feed Supplement under Central Excise Tariff Act, 1985.
2. Duty demand on Crude Vitamin A.
3. Adjustment of lapsed Modvat credit against impugned demands.

Analysis:

Issue 1: Classification of Animal Feed Supplement
The appellant, a manufacturer of Vitamin A and Animal Feed Supplement, faced a dispute regarding the correct classification of the Animal Feed Supplement under Chapter 23. The Tribunal previously held that the supplement falls under Chapter 23, a decision upheld by the Hon'ble Apex Court. This settled the classification issue, establishing that the Animal Feed Supplement is correctly classifiable under Chapter 23.

Issue 2: Duty Demand on Crude Vitamin A
The Adjudicating Authority confirmed a duty demand on Crude Vitamin A against the appellant. However, an error was noted in the computation of the demand, with the duty demand needing correction for the period May 1996 to July 1996. The appellant argued for a reduced duty demand based on this correction, which would significantly lower the total duty demand payable.

Issue 3: Adjustment of Lapsed Modvat Credit
The appellant contended that the demands confirmed pre-1st March 1997 should have allowed for the discharge of duty from the Modvat credit account before its lapse. Citing legal precedents, the appellant argued that the right to adjust tax on final products accrued when tax on inputs was paid, and the lapsed credit should be adjusted against the impugned demands. The Tribunal agreed, emphasizing that the appellant should not be denied the utilization of lapsed credit accrued prior to 1st March 1997.

In conclusion, the Tribunal allowed the appeals by setting aside the impugned orders, highlighting the appellant's entitlement to adjust lapsed Modvat credit against the duty demands confirmed for the period preceding 1st March 1997. This adjustment significantly reduced the duty liability, ensuring no additional or differential duty payment, interest, or penalties for the appellant.