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2002 (1) TMI 222 - AT - Central Excise
Issues:
1. Demand for return of Modvat credit and penalty imposed by the Commissioner of Central Excise, Lucknow. 2. Dispute regarding eligibility of Modvat credit for Residual Fuel Oil (RFO) used by the appellant. 3. Classification of RFO and Low Sulphur Heavy Stock (LSHS). 4. Interpretation of Notification No. 14/97 in relation to restricted Modvat credit. 5. Dispute related to the duty rate passed on to the appellant before the issuance of Notification No. 14/97. 6. Application of Rule 57A of the Central Excise Rules in determining Modvat credit eligibility. 7. Assessment of the duty demand and penalty imposed. Analysis: 1. The appeal challenged the order demanding the return of Modvat credit and imposing a penalty based on the Commissioner's findings that the appellant availed ineligible Modvat credit for RFO used in manufacturing activities. 2. The demand arose due to RFO being eligible for restricted Modvat credit at 10%, as per Notification No. 14/97, and the duty liability passed on to the appellant by the supplier. 3. The appellants argued that RFO differs from LSHS, citing technical parameters and supplier information, but the adjudicating authority rejected this, stating both fall under the same chapter heading in the Central Excise Tariff. 4. The Tribunal noted that Notification No. 14/97 restricted credit only to specified inputs under Chapter 27, not including RFO, indicating that the restriction did not apply to RFO if it was distinct from LSHS. 5. Regarding duty rates before Notification No. 14/97, the appellant contended they only claimed Modvat credit equal to the duty paid by the supplier, as per Rule 57A, supported by invoices and documents. 6. The Tribunal disagreed with the Revenue's argument that Modvat credit should not exceed the duty suffered by the buyer, emphasizing that credit is based on duty actually paid, regardless of whether it was fully passed on to the buyer. 7. Consequently, the Tribunal found the duty demand and penalty contrary to law, setting them aside and allowing the appeal. This detailed analysis covers the issues raised in the legal judgment comprehensively, addressing each point with relevant legal interpretations and findings.
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