2002 (12) TMI 125 - AT - Central Excise

Summary

Issues involved: Duty demand on exempted and dutiable wrist watches, Cenvat credit on inputs, SSI exemption on wrist watch cases, penalty imposition.

Summary:
The appeals were filed against an order confirming duty demand and penalty for the period 1-4-2000 to 30-8-2000. The appellants manufactured exempted and dutiable wrist watches and cases. They availed Cenvat credit on inputs for both types of watches but did not pay duty on exempted watches as required by Rule 57AD(2)(b). The dispute arose when a show cause notice was issued for duty demand and penalty, which the appellants contested. The adjudicating authority upheld the demand and penalty, leading to the appeals.

In the case of wrist watches, the demand was based on the appellants not maintaining separate inventory for inputs used in dutiable and exempted watches. However, they had reversed the Modvat credit on inputs for exempted watches, following a precedent set by the Apex Court. The Tribunal cited similar cases where duty paid inputs used in goods cleared under exemption still allowed for Modvat credit. Therefore, the demand under Rule 57AD(2)(b) was deemed invalid and set aside.

Regarding the recovery of Modvat credit under Rule 57CC, the Tribunal ruled that there is no provision for such recovery. Thus, the demand calculated at 8% of the price of exempted final products could not be confirmed or recovered. The order in this regard was deemed legally unsustainable and overturned.

The demand for wrist watch cases was confirmed as the appellants had opted for SSI exemption but were liable for duty on finished cases in stock. The validity of this demand was not challenged, and the order confirming it was upheld. However, the penalties imposed were deemed unsustainable and set aside for both the appellants and the manager.

In conclusion, the duty demand on wrist watch cases was upheld, while the duty demand on watches and the penalties were set aside. The appeals were disposed of accordingly.