2005 (6) TMI 548 - AT - Central Excise

Summary

Issues:
1. Application of Supreme Court ruling in CCE, Pune Vs. Dai Ichi Karkaria Ltd.
2. Exemption from payment of excise duty w.e.f. 01.03.1997.
3. Proposing demands on Modvat credit availed inputs.
4. Reversal of credit on Capital Goods.
5. Decision of the Commissioner upheld by the Tribunal.
6. Reference to the Larger Bench decision in CCE, Rajkot Vs. Ashok Iron & Steel Fabricators.

Analysis:

1. The judgment revolves around the application of the Supreme Court ruling in CCE, Pune Vs. Dai Ichi Karkaria Ltd. The Commissioner (Appeals) applied the ratio of this ruling to the case at hand, which involved a manufacturer of Jute, Yarn, and Twine falling under specific chapters of the Schedule to the CE Act. The Final produced by the assessee became exempted from payment of excise duty from 01.03.1997 onwards. The issue at hand was the justification of Modvat credit availed inputs lying in stock on 01.03.1997.

2. The Commissioner, after detailed examination, concluded that there was no irregular availment of credit and that there is no provision in law to direct the reversal of credit on Capital Goods under similar circumstances. This decision was upheld by the Tribunal, which found the Commissioner's view, based on the Apex Court judgment, to be correct. The Tribunal highlighted that there is no provision for reversal of Modvat credit when the final product is subsequently exempted from duty.

3. The matter was further strengthened by a reference to the Larger Bench decision in CCE, Rajkot Vs. Ashok Iron & Steel Fabricators. The Larger Bench, consisting of 5 Members of the Tribunal, clearly held that Modvat credit availed and utilized during the period when final products were duty bound does not need to be reversed when the final product is later exempted from duty. This decision by the Larger Bench was based on the Apex Court judgment and various High Court decisions, further solidifying the stance that there was no merit in the appeal, which was subsequently rejected by the Tribunal.

In conclusion, the judgment reaffirms the application of legal precedents, including the Supreme Court ruling and decisions by the Tribunal's Larger Bench, to uphold the Commissioner's decision regarding the justification of Modvat credit in the context of exemption from excise duty for specific products.