2002 (11) TMI 236 - AT - Central Excise

Summary

Issues:
- Appellant manufacturing nylon yarn claiming duty exemption
- Reversal of credit on caprolactum
- Valuation of nylon chips for duty calculation
- Appeal against duty demand, penalty, and interest

Analysis:
The appeal before the Appellate Tribunal CEGAT, Court No.I, New Delhi involved a case where the appellant, a manufacturer of nylon yarn, was contesting a duty demand of Rs. 34,00,048/- imposed by the Commissioner of Central Excise. The appellant manufactured nylon yarn, including 210 denier, which was exempt from duty during 1996-97 to 2000-2001. The dispute arose from the procurement of caprolactam, the main raw material, on which excise duty was paid. The appellant cleared nylon yarn of 210 denier without duty payment, reversing the credit on caprolactam. The Commissioner alleged duty evasion, claiming that nylon chips used in the manufacturing process were chargeable to duty due to a rescinded exemption. The appellant argued for recredit based on a precedent and challenged the valuation method for nylon chips.

The Commissioner rejected the appellant's contentions, confirming the duty demand and imposing an equivalent penalty along with interest under Section 11AB. On appeal, the Tribunal considered two main issues raised by the appellant. Firstly, relying on a precedent, the Tribunal held that the appellant was entitled to recredit the amount reversed on caprolactam. The Tribunal directed the Commissioner to verify the recredit amount and allow the appellant the benefit of the precedent. Secondly, on the valuation issue, the Tribunal agreed with the appellant's argument that the valuation of nylon chips based on two bills from August 2000 was not suitable for the entire five-year period. The Tribunal directed the Assessing Authority to reevaluate the value of nylon chips using the costing method.

Additionally, the Tribunal set aside the penalty imposed and limited the liability for interest under Section 11AB to the duty liability determined upon recomputation. The Tribunal allowed the appeal by remand, instructing the Assessing Authority to finalize the duty demand and decide on any potential penalty after the recomputation. The decision provided relief to the appellant by granting recredit, revising the valuation method for nylon chips, and addressing the penalty and interest liabilities in a more favorable manner.