2003 (7) TMI 175 - AT - Central Excise

Summary

Issues involved: Duty demands arising from (a) taking Modvat credit on common inputs without separate accounts or payment, and (b) giving special discounts to bring pen value within exempted limit.

Issue (a - Modvat credit on common inputs): The appellant took Modvat credit on common inputs without maintaining separate accounts for exempt and dutiable pens. The appellant argued that they reversed the entire credit amount to comply with the law, citing relevant tribunal and apex court decisions. The SDR contended that since no reversal was done before pen clearance, the credit reversal facility should not apply. The tribunal held that the time of reversal is immaterial as per Modvat rules, and the legal position was settled by previous tribunal decisions, thus finding no merit in the demand.

Issue (b - Duty demand on special discounts): The appellant claimed that sales under specific orders below Rs. 100 per pen were exempt under a notification. The SDR argued that bringing down the sale price through discounts should not be allowed. The tribunal examined sample cases, such as a supply order from Le Bouquet, where the price per pen was Rs. 99 inclusive of sales tax, below the exempted value. The tribunal concluded that the value was not reduced through discounts to evade duty, as the agreed price represented the full commercial consideration, and thus found no merit in the demand on this ground.

Penalties and Interest: The impugned order imposed penalties and interest on the appellant, but the tribunal noted that in the absence of short-levy of duty, penalties and interest could not be imposed. Therefore, as the principal duty was not due, penalties and interest were also set aside. Consequently, the appeal was allowed, and the impugned order was overturned.