2002 (3) TMI 175 - AT - Central Excise

Summary

Issues involved: Modvat credit on LPG used in manufacturing final products and heat treatment of semi-finished goods, imposition of penalties under Rule 57-I(4) and Rule 173Q.

Modvat Credit Issue: The appellants availed Modvat credit on LPG used in manufacturing final products and heat treatment of semi-finished goods under Rule 57A. Show cause notice was issued for recovery of the credit amount and imposition of penalties. The Joint Commissioner disallowed the credit and imposed penalties, which was upheld by the Commissioner (Appeals) for recovery of the credit amount but remanded the matter for penalties reconsideration.

Legal Interpretation: The issue revolved around whether Modvat credit on LPG used in manufacturing goods cleared without payment of duty is admissible. The original authority contended that credit is only admissible if used to discharge duty liability on final products. The appellants argued that as per Rule 57C and Rule 57CC, the restriction on credit does not apply to fuel used as input, citing a previous Tribunal decision.

Precedent and Decision: Referring to a previous Tribunal decision, it was established that when fuel is used as an input in manufacturing products cleared without duty payment, no reversal of Modvat credit or payment of additional amount is required. As LPG was used as fuel in manufacturing both duty paid and not paid products, and fuel is exempted from Rule 57C and Rule 57CC, the recovery from the appellants for LPG used in goods cleared without duty payment was deemed unnecessary.

Conclusion: The appeal was allowed, setting aside the Commissioner (Appeals) order, based on the exemption of fuel from credit reversal requirements as per relevant rules and the precedent set by the Tribunal decision.