2000 (12) TMI 129 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 57A(3) and Rule 57B regarding Modvat credit on specified duty paid on goods used in manufacturing.

Analysis:
The case involved two appeals arising from the same order regarding the Modvat credit on furnace oil used as fuel in the factory by the appellants. The department contended that the credit should be restricted to 10% as per Notification No. 5/94-C.E., dated 1-3-1994, which was amended by Notification No. 14/97-C.E. The appellants argued that Rule 57B permits credit equal to the duty paid on inputs, distinct from the restrictions under Rule 57A(3). They emphasized that Rule 57B prevails over Rule 57A, and the restrictions under Notification No. 14/97 do not apply to Rule 57B, especially for goods used as fuel. The appellants highlighted the distinction between credit under Rule 57A and Rule 57B, supported by amendments and notifications issued by the Government.

The Tribunal analyzed the provisions of Rule 57A(3) and Rule 57B to determine the applicability of specified duty credit restrictions. The Counsel for the appellants emphasized the importance of the phrase "to take credit of the specified duty paid" in Rule 57B, arguing against the application of Rule 57A(3) restrictions to Rule 57B. The Tribunal considered the absence of a separate notification under Rule 57B to specify duty paid, leading to a harmonious construction with Rule 57A for interpretation. It was concluded that the Government's authority to restrict credit of specified duty paid should be applied to Rule 57B, aligning with a previous decision by the Tribunal in a similar case involving the appellants.

Regarding penalties, the Tribunal found the penalty imposed to be harsh as it arose from an interpretation of the law. Consequently, the penalty in each appeal was reduced considering the circumstances. The penalty in appeal No. E/2801/98-NB was reduced to Rs. 1 lakh, and in appeal No. E/2802/98-NB to Rs. 2 lakhs. The appeals were disposed of with these adjustments, maintaining the restriction of Modvat credit on specified duty paid to 10% in the instant case.