2003 (11) TMI 247 - AT - Central Excise

Summary

Issues:
- Recovery of wrongly availed deemed credit under Notification 29/96
- Interpretation of Para 4 of Notification 29/96 regarding deemed credit facility
- Applicability of deemed credit facility to the appellants
- Time-barred demands for certain periods
- Reversal of credit and its impact on deemed credit denial
- Applicability of interest and penalty provisions

Analysis:

The judgment revolves around the recovery of wrongly availed deemed credit under Notification 29/96 by the appellants engaged in manufacturing specific textile materials. The Department issued show cause notices for recovery of deemed credit, invoking Rule 57-I of the Central Excise Rules. The Commissioner confirmed the demands, interest, and penalties, leading to the appeal.

The crux of the issue lies in the interpretation of Para 4 of Notification 29/96, which restricts the applicability of deemed credit to manufacturers not availing actual credit under Rule 57A(1) for specified inputs used in the manufacture of final products. The appellants had availed actual credit on LDO, leading to the denial of deemed credit. The judgment emphasizes that the denial of deemed credit is not limited to inputs directly identifiable in the final product, contrary to the appellants' arguments.

Furthermore, the judgment addresses the contention that the reversal of credit on LDO for a specific period should negate the denial of deemed credit. It references legal precedents to support the position that the subsequent reversal of credit erases the initial credit taken, impacting the denial of deemed credit.

Regarding the limitation period for demands, the judgment distinguishes between declarations filed for different final products and deems the demand for a specific period time-barred due to the declaration filed earlier. However, it upholds the demand for a subsequent period.

Lastly, the judgment clarifies that the levy of interest and penalty under Sections 11AB and 11AC is not sustainable in disputes related to deemed credit denial, citing relevant legal precedents. The appeal is partly allowed, concluding the issues discussed comprehensively.