2002 (7) TMI 213 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for Exemption Notification No. 202/88-C.E.
2. Timing of Reversal of Modvat Credit.
3. Compliance with Tribunal's Remand Order.
4. Applicability of Supreme Court Judgment in Chandrapur Magnet Wires Case.

Summary:

1. Eligibility for Exemption Notification No. 202/88-C.E.:
The appellants challenged the order confirming the differential duty demand of Rs. 78,24,665/- u/s 11A of the CE Act, 1944, arguing that they were eligible for the benefit of Notification No. 202/88-C.E. despite reversing Modvat credit after the clearance of goods. The department contended that the appellants did not fulfill the conditions of the notification as they availed Modvat credit on inputs used in the manufacture of exempted goods.

2. Timing of Reversal of Modvat Credit:
The core issue was whether the reversal of Modvat credit after the clearance of the exempted final product disqualified the appellants from availing the exemption. The Tribunal found that the reversal of Modvat credit must occur before the removal of the exempted goods, as per the Ministry of Finance circular and the Supreme Court's judgment in Chandrapur Magnet Wires (P) Ltd. v. CCE. The appellants argued that the reversal of credit, even if done after clearance, should be considered valid.

3. Compliance with Tribunal's Remand Order:
The appellants contended that the remand by the Tribunal was not an open remand but for the specific purpose of verifying the reversal of credit. They argued that the lower authorities should not have reconsidered their eligibility for the exemption. The Tribunal, however, noted that the remand order required compliance with the Supreme Court's decision, which mandated the reversal of credit before the removal of goods.

4. Applicability of Supreme Court Judgment in Chandrapur Magnet Wires Case:
The Tribunal referred to the Supreme Court's judgment in Chandrapur Magnet Wires, which allowed the benefit of exemption subject to the reversal of Modvat credit before the removal of exempted goods. The Tribunal emphasized that the reversal of credit after the clearance of goods did not meet the conditions stipulated by the Supreme Court and the Ministry of Finance circular.

Majority Decision:
The majority decision, delivered by Member (T) C.N.B. Nair, concluded that the appeal should be allowed. It was held that the reversal of Modvat credit on a monthly basis, though done after the removal of goods, satisfied the requirement for availing the exemption. The impugned order was set aside, and the appeal was allowed with consequential relief as per law.