2002 (4) TMI 169 - AT - Central Excise

Summary

Issues:
- Denial of benefit of Notification No. 5/99-C.E., dated 28-2-1999
- Imposition of penalty for shortage of finished products

Analysis:
1. The appeal was filed against the adjudication order by the Commissioner of Central Excise, who denied the benefit of Notification No. 5/99-C.E., dated 28-2-1999, demanded duty, and imposed a penalty, including Rs. 17,932 for the shortage of finished products. The duty for the shortage was deposited during the proceeding.

2. The appellants did not contest the demand and penalty for the shortage of goods in the factory.

3. The main challenge was the denial of the notification's benefit. The appellants had two factories, one availing the benefit of the notification and the other clearing goods at full tariff rate while availing Modvat credit for duty paid on inputs. The denial was based on the use of Modvat credit in the second factory.

4. The appellant argued that the notification's condition pertained to goods manufactured in the factory, not the manufacturer. They claimed entitlement to the benefit as they did not take Modvat credit for any other product in the factory availing the notification.

5. The Revenue contended that if a manufacturer avails credit for specified goods, they are not entitled to the notification's benefit. As the appellants used Modvat credit in one factory, they were ineligible for the notification.

6. The condition of the notification stated that if the manufacturer did not avail Modvat credit for specified goods or any other product in the same factory, the benefit was available. The intention was to restrict credit on exempted products or any other product in the same factory.

7. Referring to a previous Tribunal decision, it was clarified that the condition prohibited taking credit on inputs in the same factory, not on final products. Thus, the appellants were entitled to the notification's benefit for goods manufactured in the factory availing the benefit.

8. Consequently, the demand and penalty imposed were set aside, and the appellants were deemed entitled to the benefit of Notification No. 5/99-C.E., dated 28-2-1999 for the specified goods produced in their factory.