2010 (12) TMI 993 - HC - Central Excise

Penalty - benefit of cum-duty price - Whether respondent eligible to avail the benefit of Notification No. 5/98 dated 2-6-1998 and also Modvat credit of inputs used for the goods simultaneously - allegations of wrongful availment of exemption under Notification No. 5/98 dated 2-6-1998 thus duty demanded under Section 11A of the Central Excise Act 1944 - Tribunal allowed the claim - Held that - No infirmity can be found in the approach adopted by the Tribunal inasmuch as if the assessee is not entitled to exemption under the notification in question it would certainly be entitled to avail of Modvat credit in respect of the raw material used in the manufacture of the goods in question. As regards the grant of benefit of cum-duty price the Supreme Court in the case of Commissioner of Central Excise Delhi v. Maruti Udyog Ltd. (2002 (2) TMI 101 - Supreme Court) has held that the wholesale price which is charged is deemed to be the value for the purpose of levy of excise duty but the element of excise duty sales tax or other taxes which is included in the wholesale price is to be excluded in arriving at the excisable value order of the Tribunal being in consonance with the principle laid down in the aforesaid decision it is not possible to state that the Tribunal has committed any legal error in directing that the sale price of the goods should be treated as cum-duty price for the purpose of valuation and determination of duty amount no findings as regards suppression or mis-declaration. Tribunal was justified in setting aside the penalty appeal is accordingly dismissed

Summary

Issues Involved:
1. Extension of benefit of Modvat credit to the respondent.
2. Eligibility of the respondent to avail the benefit of Notification No. 5/98 and Modvat credit of inputs.
3. Setting aside of penalty imposed under Rule 173Q(1)(a) of the Central Excise Rules.

Analysis:

Issue 1: Extension of benefit of Modvat credit to the respondent
The respondent, engaged in manufacturing plastic articles, availed Modvat credit of duty paid on raw material under Rule 57A of the Central Excise Act, 1944. The dispute arose when the Central Excise officers alleged that the respondent wrongfully availed the benefit of Notification No. 5/98 by taking Modvat credit and clearing final products at NIL rate of duty. The Adjudicating Authority upheld the demand, which was confirmed by the Commissioner (Appeals) and later by the Tribunal. The Tribunal directed the re-quantification of the demand after extending the benefit of Modvat credit based on documentary evidence. The High Court found no legal error in granting Modvat credit to the respondent if not entitled to exemption under the notification.

Issue 2: Eligibility to avail the benefit of Notification No. 5/98 and Modvat credit of inputs
The respondent availed exemptions under Notification No. 5/98 and Notification No. 9/98 for different categories of plastic articles manufactured. However, the benefit of exemption under Notification No. 5/98 was subject to the condition that the manufacturer does not avail of credit of duty paid under Rule 57A or 57B. The Tribunal, following its decision in a similar case, confirmed the demand against the respondent but allowed the benefit of Modvat credit and cum-duty price. The High Court upheld the Tribunal's decision, stating that if the respondent is not entitled to exemption, they can avail of Modvat credit for raw materials used.

Issue 3: Setting aside of penalty under Rule 173Q(1)(a)
The Tribunal set aside the penalty imposed on the respondent under Rule 173Q(1)(a) of the Central Excise Rules, citing a question of interpretation of the notification without any suppression or mis-declaration of facts. The High Court agreed with the Tribunal's decision, stating that the penalty was rightly set aside as the dispute primarily involved the interpretation of the notification. The absence of a detailed order by the Tribunal did not warrant interference by the High Court.

In conclusion, the High Court dismissed the appeal, finding no legal error in the Tribunal's decision to grant Modvat credit, cum-duty price benefit, and setting aside the penalty. The judgment emphasized the importance of interpreting notifications correctly and allowing Modvat credit where entitlement to exemption is in question.