2008 (2) TMI 233 - AT - Central Excise

Notification no. 46/94 Exemption cannot be denied merely on basis that goods are removed clandestinely Credit on clandestinely removed goods will be assumed to have been reversed if duty paid from PLA is more than credit availed on them even if credit is taken on exempted goods but if duty has been paid on such exempted goods it will amount to reversal of credit ROM application by dept. is rejected because revenue not filed any appeal against order of adjudicating authority

Summary

Issues:
1. Rectification of mistake apparent from the record in respect of the Tribunal's order.
2. Eligibility of exemption under Notification 46/94 for mechanical appliances used in agriculture.
3. Interpretation of Central Excise Rules regarding availing Modvat credit.
4. Reversal of credit for duty paid on final products exempted from excise duty.
5. Allegations of clandestine removal of goods and reversal of credit.

Analysis:

Issue 1: Rectification of mistake apparent from the record
The applicant sought rectification of a mistake in the Tribunal's order, claiming that the decision contradicted the law laid down by the Supreme Court in a specific case. The Tribunal had held that the demand confirmed by the Commissioner for duty on final products, even though Modvat credit was availed, could not be sustained if the products were eligible for exemption under a notification. The Tribunal reasoned that the issue of recovery of credit was not before it, and the duty demand was not valid for exempted goods.

Issue 2: Eligibility of exemption under Notification 46/94
The Revenue contended that the Tribunal erred in not considering that availing Modvat credit on inputs rendered the final product ineligible for duty-free clearances under the notification. They argued that the provisions of Central Excise Rules, specifically Rule 57C, should be read into the notification. However, the Tribunal held that the notification did not impose a condition regarding Modvat credit and that the Supreme Court's decision cited by the Revenue was not directly applicable to the case at hand.

Issue 3: Interpretation of Central Excise Rules
The Revenue further argued that Rule 57C mandated no credit for duty paid on inputs if the final product was exempt from excise duty. They contended that the Tribunal overlooked this rule, similar to a case cited before the Supreme Court. The Tribunal, however, clarified that payment of duty on the final product, even if not required, would be deemed as a reversal of credit, aligning with the law.

Issue 4: Reversal of credit for duty paid on exempted final products
The Tribunal upheld that the eligibility for exemption under the notification was not dependent on whether Modvat credit was taken. It emphasized that the Commissioner did not question the exemption's admissibility, and the Tribunal's decision was valid since the Revenue did not appeal against it.

Issue 5: Allegations of clandestine removal and credit reversal
Regarding the alleged clandestine removal of goods and the reversal of credit, the Tribunal found no merit in the Revenue's claim. The Tribunal noted that even if such removal occurred, the duty paid from the personal ledger account exceeded the credit taken, indicating a reversal of the entire Modvat credit.

In conclusion, the Tribunal rejected the application for rectification of mistake, maintaining that the original order was legally sound and correctly applied the relevant laws and notifications to the case at hand.