2000 (10) TMI 100 - AT - Central Excise

Summary

Issues involved: Refund of Modvat credit for duty paid on tin plate used for manufacturing tin containers, availability of Modvat credit for duty paid on inputs, provision for cash refund in Modvat credit.

Summary:
The Appellate Tribunal CEGAT, Mumbai addressed the issue of refund of Modvat credit for duty paid on tin plate used in manufacturing tin containers for vegetable products. Initially disallowed by the department, the Tribunal later allowed the Modvat credit on tin plate to be utilized in the manufacture of vegetable products. Subsequently, the duty on the vegetable product was withdrawn in the budget of 1996-97.

The assessee claimed a refund of the Modvat credit as it could no longer be used towards payment of duty on the final product. The Asst. Commissioner rejected the claim citing the absence of a provision for cash refund in Modvat credit. However, the Commissioner (Appeals) granted cash refund based on the Tribunal's order.

The department challenged this decision on three grounds. Firstly, they claimed the respondent manufactured another final product, acid oil, but the Commissioner (Appeals) found no evidence to support this. Secondly, the department argued that Section 11B of the Act pertains to claiming duty, not Modvat credit, which was contradicted by Rule 57A indicating Modvat credit as duty. Lastly, the department contended that there is no provision in the rules for giving Modvat credit, citing previous Tribunal cases where cash refunds were ordered.

The Tribunal upheld the Commissioner (Appeals) decision, stating that when a manufacturer is unable to utilize Modvat credit due to departmental actions, relief in cash is appropriate. In this case, the assessee was compelled to pay duty from personal funds due to the denial of credit, justifying the cash refund. The appeal was dismissed, affirming the cash refund granted by the Commissioner (Appeals).