2007 (9) TMI 182 - AT - Central Excise

Duty demanded from assessee in respect of goods DM & DAS water cleared to EOU Procedural lapse of EOU for not applying for procurement of goods duty free is condonable Revenue neutral Demand set aside Credit available on furnace oil used in steam generation supplied to EOU.

Summary

Issues:
1. Availing input duty credit on Naphtha and SKO for electricity generation.
2. Use of Modvat availed on Naphtha/SKO for electricity generation.
3. Use of Modvat availed furnace oil for steam generation.
4. Manufacturing and clearing DM Water and DAS Water without duty payment.

Issue 1 - Availing input duty credit on Naphtha and SKO for electricity generation:
The appellants availed input duty credit on Naphtha and SKO used for electricity generation supplied to certain entities. The Commissioner disallowed credit on Naphtha and SKO utilized in electricity generation for a specific period and ordered recovery of the amount with penalties. The Tribunal upheld the Commissioner's decision on this issue.

Issue 2 - Use of Modvat availed on Naphtha/SKO for electricity generation:
The Commissioner disallowed the credit taken on Naphtha and SICO used in electricity generation for a specific period and imposed penalties. The Tribunal remanded this issue back to the Commissioner for further adjudication in a separate appeal filed by the party.

Issue 3 - Use of Modvat availed furnace oil for steam generation:
The department raised this issue in a subsequent show cause notice, which was decided in favor of the assessee in a previous case. The Tribunal upheld the decision of the lower authority on this issue based on the parity between the definitions of "input" under relevant rules.

Issue 4 - Manufacturing and clearing DM Water and DAS Water without duty payment:
The appellants cleared DM Water and DAS Water to a 100% EOU without payment of duty. The department argued that the appellants violated the law by not following the prescribed procedure for procurement of raw materials. However, the Tribunal upheld the decision of the Commissioner, stating that since the goods were supplied to a 100% EOU, duty payment was not required, and any procedural lapses should be condoned.

In conclusion, the Tribunal dismissed the appeal of the Revenue, upholding the decisions of the Commissioner on issues 3 and 4, while remanding issue 2 for further adjudication. The judgment emphasized the importance of following procedural requirements and the eligibility for duty-free procurement for 100% EOUs.