2007 (12) TMI 95 - AT - Central Excise

Compounded levy scheme - it was not open to the Revenue to recover any amount equivalent to MODVAT credit taken and utilized in respect of inputs lying in stock, or contained in finished goods lying in stock assessee can t be asked to pay an amount equivalent to the input duty credit already utilized - Show-Cause Notice dated 12-12-1997, for the period March to July 1997, is time-barred, as there is no allegation of suppression or mis-statement in SCN

Summary

Issues:
1. Demand of differential duty on final products cleared from factory.
2. Demand for reversal of MODVAT credit on inputs in stock.
3. Time-barred demand of duty on transportation cost.

Analysis:

Issue 1: Demand of Differential Duty
The ld. Commissioner (Appeals) demanded a differential duty from the appellants for their final products cleared from the factory during a specific period. The demand was based on including the cost of transportation of goods from the factory to the consignment agent in the assessable value of the goods. The appellants challenged this demand on the ground of limitation. The Tribunal found that the demand was not sustainable as there was no allegation of suppression or misstatement by the assessee to evade payment of duty. The Tribunal held that suppression is a crucial element for invoking a larger period of limitation under Section 11A of the Central Excise Act.

Issue 2: Demand for Reversal of MODVAT Credit
The second demand was for the reversal of MODVAT credit taken on inputs in stock as well as inputs contained in finished goods present in stock. The appellants argued that there was no provision of law during the material period for the recovery of MODVAT credit already utilized. The Tribunal referred to previous decisions and relevant notifications to conclude that the Revenue could not recover any amount equivalent to the MODVAT credit taken and utilized in respect of inputs lying in stock or contained in finished goods lying in stock as on a specific date. The Tribunal found that the impugned order lacked legal support for such a demand.

Issue 3: Time-Barred Demand of Duty on Transportation Cost
Regarding the demand of duty on the cost of transportation of excisable goods from the factory to the consignment agent, the appellants challenged it as time-barred. The Revenue alleged that the appellants had paid similar duty for certain months within the normal period, indicating intent to evade payment. However, the Tribunal was not convinced by the Revenue's case, as there was no specific allegation of suppression or misstatement in the Show-Cause Notice. Therefore, the Tribunal held that neither of the demands was sustainable against the appellants and allowed the appeal.

In conclusion, the Tribunal ruled in favor of the appellants, finding that both the demands were not legally sustainable. The judgment highlighted the importance of specific allegations of suppression for invoking a larger period of limitation and emphasized the inability of the Revenue to recover MODVAT credit already utilized based on relevant notifications and previous decisions.