2007 (9) TMI 178 - AT - Central Excise

Once it is held that no duty is payable on goods the question of payment of duty collected in excess does not arise Duty demand not sustainable u/s 11D Once it is not denied that inputs were received & used in final product, credit can t be denied for procedural lapse of non maintaining proper accounts

Summary

Issues:
1. Duty demand on perfumes and air fresheners.
2. Modvat credit denial for procedural lapses.
3. Penalty imposition under Section 11AC.

Issue 1: Duty demand on perfumes and air fresheners

The appellant, engaged in manufacturing perfumes and air fresheners, claimed perfumes were duty-exempt as they were manufactured without power. However, during a factory visit, it was found that air fresheners were removed without debiting duty, leading to a duty demand. The Central Excise Department also sought duty on perfumes, alleging duty recovery from customers. The Tribunal found lack of evidence supporting duty payment on perfumes and held that the duty recovery claim was baseless. Citing Section 11D, the Tribunal ruled that no duty amount was collected as excise, thus setting aside the duty demands on perfumes and air fresheners.

Issue 2: Modvat credit denial for procedural lapses

Regarding air fresheners, the duty liability was acknowledged, but the appellant contested the denial of Modvat credit due to procedural lapses in maintaining registers. The Tribunal noted that if inputs' receipt and use were not denied, credit could not be denied for procedural lapses. Referring to a Supreme Court decision, the Tribunal held that Modvat credit was admissible, subject to producing duty-paying documents. The matter was remanded to verify input usage and determine duty liability, with a fresh penalty assessment considering the set-aside duty demand under Section 11D.

Issue 3: Penalty imposition under Section 11AC

The penalty under Section 11AC was imposed based on the sustained duty demands, which were later set aside. The Tribunal directed a reassessment of the penalty, considering the annulled duty demands and other relevant factors. The appeal was disposed of accordingly, with a remand to the original authority for reassessment based on the Tribunal's findings.

This judgment addressed the duty demands on perfumes and air fresheners, the denial of Modvat credit for procedural lapses, and the penalty imposition under Section 11AC, providing detailed analysis and legal reasoning for each issue involved.