2000 (9) TMI 193 - AT - Central Excise

Summary

Issues involved: Appeal against duty demand, penalty imposition u/s 11D of Central Excise Act, Rules 209 and 210 of Central Excise Rules.

In the present case, the appeal was filed challenging the order-in-appeal of the Commissioner (Appeals) which confirmed the duty demand of Rs. 11,88,527/- against the appellants under Section 11D of the Central Excise Act. Additionally, a penalty of Rs. 5 lakhs was imposed under Section 9AA of the Act and under Rules 209 and 210 of the Central Excise Rules. The appellants, a small scale unit engaged in the manufacture of footwear, were taking Modvat credit of excise duty paid on inputs used in the manufacture of both dutiable and exempted varieties of footwear falling under Chapter Heading 64.01 of the Schedule to the CETA, 1985.

The Tribunal noted that the appellants were utilizing the Modvat credit for paying duty on the dutiable category of footwear and for payment of an amount calculated @ 8% of the basic price of the exempted category as provided under Rule 57CC. It was observed that the appellants had not retained the amount collected from customers and had passed it on to the Government as required by Section 11D of the Central Excise Act. The show cause notice recognized that the appellants had been reversing Modvat credit proportionately on a prorata basis on inputs used in the manufacture of exempted variety of footwear and that the amount so reversed had been charged from the customers. Invoices placed on record showed debit entries in the RG 23A account and PLA, indicating compliance with the relevant provisions.

Therefore, the Tribunal found that the charge of contravention of the provisions of Section 11D was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed.