2011 (7) TMI 649 - AT - Central Excise

MODVAT Credit - whether MODVAT credit of the duty paid on the tin containers received in the packing unit of the assessee and used in the manufacture of their marketable product, viz., canned lubricating oil during the material period is liable to be denied to them - Held That - It is not in dispute that the blending and packing units were covered by a single registration upto 12/09/95, thereby meaning that both the units were parts of the registered factory. Receipt of containers in the packing unit during the said period was receipt of input in the factory. Hence there is no question of denial of MODVAT credit for the period upto 12/09/95 - also it is not in dispute that, during the period from 12/09/95 also, the assessee paid duty of excise on their final marketable product on the basis of assessable value determined by including the cost of packing. The packing activity was treated as part of the manufacture of the finished product and the same fact was acknowledged by the Revenue, which accepted the payment of duty. Reliance placed on Vikram Cement (2006 (1) TMI 130 - SUPREME COURT OF INDIA) and Jaypee Rewa Cement case (2001 (8) TMI 1332 - SUPREME COURT OF INDIA). Extended period of limitation - Held that - Assessee did not suppress the material fact, though they had deliberate intention to save inadmissible credit . There was no supression thus legal requirement for invoking extended period for recovery of inadmissible credit, levying interest thereon and imposing penalty was not fulfilled in this case.

Summary

Issues:
- Denial of MODVAT credit on tin containers received in packing unit
- Demand of duty, interest, and penalty
- Challenge of limitation period for demand
- Interpretation of Rule 57A of Central Excise Rules
- Adjudication of extended period of limitation and penalty imposition

Analysis:

1. The case involved a dispute regarding the denial of MODVAT credit on tin containers received in the packing unit of the appellant. The appellant, an oil corporation, had two units where blending and packing activities took place. The dispute arose when the department alleged that the appellant availed inadmissible MODVAT credit on tin containers. The Commissioner confirmed the demand of duty, interest, and penalty, which the appellant contested.

2. The appellant argued that the denial of MODVAT credit was invalid before a certain date as both units were covered by a single registration. They contended that the packing unit was part of the factory, and duty was paid on the final product including packing costs. The appellant also challenged the demand on the grounds of limitation, stating that there was no suppression of facts to invoke the extended period.

3. The department, represented by the SDR, maintained that the input was not received in the factory premises during a specific period, justifying the denial of MODVAT credit. The SDR cited relevant legal precedents to support the department's position on the denial of credit and limitation issues.

4. After considering the arguments, the Tribunal analyzed whether the MODVAT credit on tin containers received in the packing unit could be denied to the appellant. The Tribunal found that during the period when both units were under a single registration, the credit could not be denied. For the subsequent period, the Tribunal noted that the packing unit was separately registered, but since duty was paid on the final product including packing costs, the credit should not be denied.

5. The Tribunal also addressed the limitation issue, emphasizing that the legal requirement for invoking the extended period for recovery of inadmissible credit, interest, and penalty was not fulfilled in this case. The Tribunal concluded that the appellant's appeal should succeed, and the demand was not sustainable.

6. Regarding the Revenue's appeal for penalty imposition, the Tribunal dismissed it as the penalty imposed by the Commissioner was deemed unsustainable. Consequently, the Revenue's appeal was also dismissed.

In conclusion, the Tribunal ruled in favor of the appellant, finding that the denial of MODVAT credit and the imposition of penalty were not justified based on the facts and legal interpretations presented during the proceedings.