2008 (7) TMI 323 - AT - Central Excise

Credit on inputs used in mfg. of Disposable Cups which attract Nil rate of duty under Notification No. 14/92-C.E. - Reversal of credit on inputs made by assessee after clearance of goods and by reversing the credit on a daily basis as certified by Chartered Accountant revenue contention that assessee should have made reversal before clearance and one time debit on daily basis has not fulfilled condition of notification ibid, is not aqcceptable - appellant is eligible for exemption - fact of reversal of credit was known to the department since it had been mentioned in RG23A Part II, and classification list filed, so suppression is not proved therefore, larger period not invocable

Summary

Issues:
Classification of disposable cups for duty exemption under specific notifications; Availing credit of Central Excise duty on inputs for manufacturing exempted goods; Maintenance of separate accounts for dutiable and exemptable goods; Time-barred show cause notices; Reversal of Modvat credit for eligibility of exemption; Verification of debits for exemption eligibility.

Analysis:
The appellants were involved in manufacturing plastic articles falling under specific chapters of the Schedule to CETA, claiming duty exemption for disposable cups under relevant notifications. They availed Central Excise duty credit on inputs used for manufacturing exempted goods but failed to maintain separate accounts for dutiable and exemptable products, leading to a show cause notice and subsequent demand for duty payment along with penalties, upheld by the Commissioner (Appeals).

Regarding the time-barred show cause notices issued, the advocate argued that the 1997 notice was beyond the limitation period, while for the period Jan.'95 to Mar.'95, they reversed the credit of duty paid on inputs proportionately on a daily basis for disposable cups, citing eligibility for exemption. The department alleged suppression based on the classification list filed by the appellants, claiming benefits not applicable to disposable cups made from plastic sheets.

The Tribunal observed that the appellants had indeed reversed the Modvat credit daily, known to the department through records. The demand for duty from Apr.'92 to Feb.'94 was deemed invalid due to the known credit reversal practice. However, for the period Jan.'95 to Mar.'95, the department contended that the reversal should have been done before clearance of goods, not on a daily basis as claimed. Despite previous judgments supporting post-clearance credit reversal, the Tribunal remanded the matter to verify the correctness of daily debits for exemption eligibility, emphasizing procedural compliance.

In conclusion, the Tribunal found the appellants eligible for exemption if the reversal of credit was indeed done daily as claimed, necessitating verification by the adjudicating authority. The judgment highlighted the importance of procedural adherence for availing duty exemptions, emphasizing the need for accurate documentation and compliance with notification conditions to avoid penalties and demands.