2011 (1) TMI 510 - AT - Central Excise

Differential demand of duty - Exemption under Notification 9/98, dated 2-6-1998 - Impugned period 22-7-1998 to 29-7-1998 - The appellant has taken a defence that some of the goods were rejected by the buyer to their unit no. 1 and unit no. 1 has taken the modvat credit of the same and after removal of the defects in those goods, same were cleared on payment of duty - Hence the clearances of the rectified goods is not includable in the clearances made by the appellants during the impugned period and after the said clearance are excluded from the total clearances, then the appellants will fall within the limits - Held that - if any goods have been received by the appellants as rejected goods, there is a procedure for recording and clearance of the same, which has not been followed by the appellants - Decided against the assessee.

Summary

Issues:
Appeal against demand and penalty confirmation under Notification 9/98 for financial year 1998-99.

Analysis:
The appellants appealed against the confirmation of a demand of Rs. 10,235/- and a penalty of Rs. 1000 under Notification 9/98 for the financial year 1998-99. The allegation was that they crossed the aggregate value of clearance of Rs. 50 lakhs at Invoice No. 70, dated 22-7-1998 of Unit No. 2. The appellants paid duty at 60% instead of 80% of the nominal rate of duty till 29-7-1998. A show-cause notice was issued to recover the differential duty on clearances during the period in question. Despite multiple opportunities, the appellants did not appear or request an adjournment. It was noted that the appellants did not wish to provide any additional defense beyond the appeal memo. The matter was taken up for final hearing.

The duty rates under Notification No. 38/97-C.E., dated 27-6-97 were examined. It was observed that duty was payable at 60% of the nominal rate of duty for clearances up to an aggregate value not exceeding 50 lakhs for the financial year 1998-99. The rate increased to 80% for clearances immediately following the specified limit. The notification also provided clarifications on the determination of aggregate value for clearances, excluding certain types of clearances from the calculation.

The appellants argued that goods rejected by the buyer were sent to Unit No. 1, which took modvat credit. After rectification, these goods were cleared from Unit No. 1 on payment of duty. They contended that these clearances should not be included in their total clearances for the period in question to fall within the limits. However, this defense was rejected based on the clarification provided in the notification. The Tribunal noted that the appellants did not follow the proper procedure for recording and clearing rejected goods. Therefore, the impugned order confirming the demand and penalty was upheld, and the appeal was rejected.