2001 (7) TMI 207 - AT - Central Excise

Summary

Issues Involved:
1. Disallowance of Modvat credit.
2. Payment of interest and imposition of penalty.
3. Valuation of captively consumed goods.
4. Applicability of Rule 57CC of the Central Excise Rules.

Summary:

1. Disallowance of Modvat Credit:
The Commissioner of Central Excise & Customs, Nagpur, disallowed Modvat credit amounting to Rs. 1,28,61,279/- and ordered the appellant to pay an equivalent amount if the credit had been utilized, or disallow the unutilized credit u/r 57(I)(iii) of the Central Excise Rules.

2. Payment of Interest and Imposition of Penalty:
The Commissioner ordered payment of interest on Rs. 1,04,40,028/- u/r 57I(5) and imposed a penalty of the same amount u/r 57I(4). Additionally, a penalty of Rs. 25.00 lakhs was imposed concerning show cause notices dated 1-10-1999 and 19-11-1999.

3. Valuation of Captively Consumed Goods:
The appellant, engaged in manufacturing paper and paper boards, captively consumed "pulp" in its Ballarpur unit and transferred a portion to its Ashti unit. The Department issued show cause notices demanding Rs. 2,28,88,866/- for the period from September 1996 to September 1999, alleging that the appellant misdeclared the cost of goods by considering only direct costs and not including profits as required u/r 6(b)(ii) of the Valuation Rules, 1975.

4. Applicability of Rule 57CC of the Central Excise Rules:
The appellant argued that the clearance of pulp to its sister unit was governed by Rule 57CC, which requires payment of 8% of the price of the exempted final product. The Department contended that the appellant should have used the value of comparable goods sold by its other units. The Tribunal held that Rule 57CC applies only when there is a sale, and in the case of stock transfers between units of the same company, no sale occurs. Therefore, the provisions of Rule 57CC do not apply, and the Department's demand was not based on law.

Conclusion:
The Tribunal allowed the appeal, rejecting the Department's case and accepting the appellant's argument that no reversal of Modvat credit was required under Rule 57CC for stock transfers between units of the same company. The appeal was allowed with consequential relief according to law.