2007 (8) TMI 108 - AT - Central Excise

Cenvat/Modvat - Appellant under bona fide belief had cleared the manufactured product Agribhor at nil rate of duty but later tribunal consider dutiable and demand were made along with interest and penalty - Appellant entitle for credit of duty paid after submission of duty paid documents

Summary

Issues:
Classification of the product "Agribor" under Chapter Heading 31.05 of the schedule to the CETA, 1985 for duty exemption under Notification 5/99-CE dated- 1-3-1999.
Imposition of duty under CET sub-heading 2840.00 due to non-matching elements in the product.
Claim for Modvat credit by the appellants.
Admissibility of Modvat credit in the case of misdeclaration and wrongful availment of exemption notification.
Procedural compliance for availing Modvat credit.

Classification Issue:
The appellants classified the product "Agribor" as "other fertilizers" under Chapter Heading 31.05 of the CETA, 1985 for duty exemption under Notification 5/99-CE. However, a show cause notice was issued proposing classification under CET sub-heading 2840.00 due to the product not containing the required elements of nitrogen, phosphorous, and potassium. The Joint Commissioner confirmed the duty demand, which was later reduced by the Commissioner (Appeals). The Tribunal upheld the duty demand but reduced the penalty and remanded the case for examining the Modvat credit claim under Rule 57E(3) of the Central Excise Rules.

Modvat Credit Issue:
The Commissioner (Appeals) disallowed the Modvat credit claim, stating that Rule 57E did not apply as there was no refund or additional duty situation. However, the Tribunal found that the appellants were entitled to Modvat credit since the disputed product was held dutiable. The lower appellate authority's finding of misdeclaration should not have clouded the Modvat credit issue. The appellants were directed to produce documents evidencing duty payment on inputs used in manufacturing "Agribor" for the admissibility of Modvat credit, as the production dispute was resolved in favor of duty liability.

Conclusion:
The Tribunal allowed the appeal, extending Modvat credit to the appellants for duty paid on inputs used in manufacturing "Agribor." The procedural requirement of filing Modvat declaration was deemed unnecessary due to the initial classification dispute under the exemption notification. The case was remanded for verification of duty payment documents, disregarding the misdeclaration issue, and emphasizing the admissibility of Modvat credit post-resolution of the duty liability classification.