2008 (3) TMI 227 - AT - Central Excise

Whether credit is available on goods clandestinely removed held, yes - held that once duty is demanded in respect of final products alleged to have been removed clandestinely, assessee is entitled to claim Modvat credit on inputs used in manufacture of goods - Respondent manufactured 250 Kgs. of 100% Viscose Yarn without obtaining any Central Excise Registration and, therefore, confiscation of the goods is justified

Summary

Issues:
1. Modvat benefit and penalty reduction.
2. Confiscation of 250 Kgs. of 100% Viscose Yarn and imposition of redemption fine and penalty.
3. Eligibility for Cenvat Credit without Central Excise Registration.
4. Justification of penalty and confiscation.
5. Applicability of case laws on confiscation of goods.
6. Reduction of penalty amount.

Analysis:

Issue 1: Modvat benefit and penalty reduction
The appeal was filed by the Revenue against the Commissioner (Appeals) order allowing Modvat benefit and reducing the penalty. The Respondent also filed a cross-objection regarding the confiscation of 250 Kgs. of 100% Viscose Yarn and imposition of fines. The Commissioner (Appeals) modified the adjudication order by allowing Cenvat Credit subject to verification and reducing the penalty under Section 11AC of the Central Excise Act. The Tribunal upheld the Commissioner's decision on Modvat benefit and penalty reduction.

Issue 2: Confiscation of 250 Kgs. of 100% Viscose Yarn
The Respondent's factory was found manufacturing goods without Central Excise Registration, leading to the confiscation of 250 Kgs. of Viscose Yarn. The Adjudicating Authority imposed fines and penalties, which were modified by the Commissioner (Appeals). The Tribunal justified the confiscation of goods due to the lack of registration and upheld the penalty amount after considering the overall facts and circumstances of the case.

Issue 3: Eligibility for Cenvat Credit without Central Excise Registration
The Revenue argued that the Respondent, without Central Excise Registration, was not eligible for Cenvat Credit. The Respondent's advocate cited previous decisions and the Supreme Court's ruling to support their claim for Cenvat benefit. The Tribunal considered the Respondent's unawareness of law changes, their compliance with proper documentation, and their acceptance of duty liability after allowing Cenvat benefit in deciding to allow the Cenvat Credit.

Issue 4: Justification of penalty and confiscation
The Revenue contended that the Respondent's lack of registration and clearance of goods without proper documentation warranted penalties and confiscation. The Tribunal upheld the confiscation of goods due to manufacturing without registration. The penalty amount was enhanced from Rs. 25,000 to Rs. 50,000 considering the unpaid duty amount and overall circumstances.

Issue 5: Applicability of case laws on confiscation of goods
The Respondent's advocate referred to case laws supporting their argument against confiscation due to the presence of goods in the factory. However, the Tribunal differentiated this case as the Respondent was unregistered, making the case laws inapplicable. The Tribunal justified the confiscation based on the lack of registration.

Issue 6: Reduction of penalty amount
The Commissioner (Appeals) had reduced the penalty amount, which was further enhanced by the Tribunal to Rs. 50,000 considering the unpaid duty amount and other circumstances. The Tribunal modified the order and disposed of the appeal and cross-objection accordingly on 24-3-2008.