2001 (10) TMI 192 - AT - Central Excise

Summary

Issues involved: Determination of entitlement to Modvat credit on processed fabrics, imposition of penalty, validity of Chief Commissioner's instructions, reversal of Modvat credit, imposition of duty and penalty.

Entitlement to Modvat credit: The respondent, a manufacturer of fabrics, sent fabrics for processing and claimed credit of duty paid by the processor. The Assistant Commissioner denied credit, stating the processes did not constitute manufacture. Despite this, the respondent continued to take credit until notices were issued for disallowance. The Deputy Commissioner held the processes did not amount to manufacture, disallowed the credit, and imposed duty recovery and penalty.

Imposition of penalty: The Commissioner (Appeals) acknowledged the respondent's reliance on Chief Commissioner's advice but remanded the matter for verification of credit usage. He opined that penalty imposition should be based on verification of facts and absence of mala fide intent. The department challenged this decision, arguing the Chief Commissioner was not the proper authority for Modvat credit matters.

Validity of Chief Commissioner's instructions: The respondent claimed to have received oral instructions from the Chief Commissioner to continue taking credit pending clarification from the Board. The department contested this, stating the Chief Commissioner lacked authority in Modvat credit issues. The Commissioner (Appeals) found the respondent's actions bona fide, considering its representation to the Chief Commissioner and the Board.

Reversal of Modvat credit: The respondent reversed the Modvat credit in RG 23A Part II upon utilizing it for duty payment. The Commissioner (Appeals) noted this reversal, indicating no need for payment duplication if duty was not applicable to the finished product. The decision was upheld, dismissing the appeal and affirming the Commissioner (Appeals) findings.