2003 (6) TMI 120 - AT - Central Excise

Summary

Issues: Liability to pay 8% of price of exempted goods under Rule 57CC of Central Excise Rules, 1944; Applicability of Modvat credit; Time-barred demand; Imposition of penalty under Section 11AC and Rule 173Q.

Liability to pay 8% of price of exempted goods under Rule 57CC:
The appeal questioned whether the company was obligated to pay 8% of the price of exempted goods under Rule 57CC of the Central Excise Rules, 1944, when utilizing Modvat credit for inputs used in manufacturing. The company contended that the goods cleared were not fully exempted from duty, citing specific clearances exempted from duty under certain conditions. They argued that a one-to-one correlation between inputs and final products should not be established, relying on legal precedents. The Tribunal analyzed the notifications exempting goods and the relevant rules, concluding that the company was liable to pay 8% of the price of exempted goods at the time of clearance, as they had not maintained separate inventory and accounts for exempted products.

Applicability of Modvat credit:
The company claimed that since Modvat credit was validly availed at the time of input receipt, it should not be disallowed if used in manufacturing exempted goods subject to specific conditions. They argued against the applicability of Sections 11A(1) and 11AC of the Central Excise Act, emphasizing the lack of machinery provisions for recovering the 8% amount under Rule 57CC. The Tribunal acknowledged the absence of a time limit in Rule 57CC but upheld the liability to pay 8% of the price of exempted goods, noting that the demand was not time-barred.

Time-barred demand:
Regarding the time limit for the demand, the company contended that the show cause notice issued years later made the demand time-barred. They highlighted their regular filing of returns and substantial yearly duty payments to argue against intentional suppression of facts. The Tribunal agreed that the demand was not time-barred but found the company liable to pay the 8% amount for exempted goods.

Imposition of penalty under Section 11AC and Rule 173Q:
The Department argued for penalty imposition under Rule 173Q due to Modvat credit availed for exempted products. However, the Tribunal ruled out penalty under Section 11AC of the Central Excise Act, stating that the 8% amount was not excise duty. Considering the circumstances and the company's payment upon notification, the Tribunal decided against imposing penalties under Section 11AC and Rule 173Q, also exempting interest under Section 11AB. The appeal was disposed of with penalties set aside.

This detailed analysis of the judgment addresses the issues of liability under Rule 57CC, Modvat credit applicability, time-barred demand, and penalty imposition, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Appellate Tribunal CESTAT, New Delhi.