2008 (4) TMI 80 - AT - Central Excise

Assessee contend that in similar issue, decision of Tribunal in earlier cases has been accepted by Revenue - since the department has not gone in further appeal against those orders of the Tribunal, those orders attained finality - hence the present demands have to be set aside following the ratio of those earlier CESTAT orders CBEC criticizing Tribunal s earlier order on ground that tribunal is erred in understanding technical opinion, in not justified assessee s appeal allowed

Summary

Issues Involved:
1. Confirmation of duty demand and imposition of penalty by the adjudicating Commissioner.
2. Department's appeal against the order of Commissioner dropping the duty demand.
3. Applicability of earlier CESTAT decisions.
4. Grounds for disallowance of Modvat credit.
5. Allegations of use of non-conforming raw materials.
6. Assumptions and presumptions made by the Department.
7. Certification and blending of granules.
8. Limitation and suppression of facts.
9. Levy of penalty and demand of interest.

Issue-wise Detailed Analysis:

1. Confirmation of Duty Demand and Imposition of Penalty by the Adjudicating Commissioner:
The appellants contested the confirmation of duty demand and imposition of penalty by the adjudicating Commissioner, Kolkata II. They argued that similar cases had been decided by the Tribunal in their favor, and the Department had not appealed against those decisions. The Tribunal noted that the Department had not challenged the earlier orders, which had attained finality. Consequently, the duty demands and penalties in the present cases were unsustainable.

2. Department's Appeal Against the Order of Commissioner Dropping the Duty Demand:
In one appeal, the Department challenged the order of Commissioner, Kolkata V, who had dropped the duty demand. The Tribunal found that the Commissioner had followed the ratio of earlier Tribunal decisions. Since the Department had not appealed against those decisions, the Tribunal upheld the Commissioner's order and dismissed the Department's appeal.

3. Applicability of Earlier CESTAT Decisions:
The Tribunal emphasized that the Department's failure to appeal against earlier CESTAT orders meant those orders had attained finality. Therefore, the ratio of those decisions had to be followed in the present cases. The Tribunal criticized the Department for not safeguarding revenue interests by failing to file appeals against contrary orders.

4. Grounds for Disallowance of Modvat Credit:
The appellants argued that they had taken Modvat credits on granules purchased from manufacturers and used in the manufacture of pipes supplied to DOT. There was no evidence that any other granules were received or that the credited granules were not used in their factory. The Tribunal found no basis to disallow the Modvat credits, as all procedural formalities were duly complied with.

5. Allegations of Use of Non-conforming Raw Materials:
The Department alleged that the appellants used granules not conforming to DOT specifications. The Tribunal noted that even if the granules used were of a different grade, it was a matter between the manufacturer and the buyer. Modvat credits could not be disallowed on such grounds. The Tribunal found the Department's assumptions and presumptions baseless and unfounded.

6. Assumptions and Presumptions Made by the Department:
The Tribunal criticized the Department for making baseless assumptions, such as the appellants receiving granules of a specific grade without taking Modvat credits on them. The Tribunal found no evidence to support these assumptions and noted that the Department's case was based on mere surmises and conjectures.

7. Certification and Blending of Granules:
The Tribunal considered letters from granule manufacturers and CIPET, which certified that pipes conforming to DOT specifications could be manufactured by blending different grades of granules. The Tribunal found that the appellants had used a proper mix of granules to achieve the required parameters, and there was nothing illegal about this practice.

8. Limitation and Suppression of Facts:
The appellants argued that the show cause notice was barred by limitation for most of the period in question. The Tribunal found no suppression of facts or misstatement by the appellants. The Department was fully aware of the appellants' manufacturing activities and had regularly verified their records. The Tribunal held that the extended period of limitation was not applicable.

9. Levy of Penalty and Demand of Interest:
The Tribunal found the levy of 100% penalty and demand of interest by the Commissioner to be illegal and invalid. The appellants had taken Modvat credits in accordance with the law and had not violated any provisions. The Tribunal set aside the penalties and interest imposed by the Commissioner.

Conclusion:
The Tribunal allowed the appeals filed by the appellants and set aside the impugned orders confirming duty and penalty. The Department's appeal was dismissed, and the Tribunal upheld the order of the Commissioner dropping the duty demand. The Tribunal emphasized the need to follow the ratio of earlier CESTAT decisions and criticized the Department for its failure to appeal against contrary orders.