2004 (3) TMI 149 - AT - Central Excise

Demand of Cenvat/Modvat - manufacture of dutiable and exempted goods - reversal of Modvat credit for exempted goods - applicability of Rule 57CC - HELD THAT - The present appeal has been filed based on direction of Commissioner of Central Excise, Hyderabad to file an appeal against the aforesaid order. The appeal contends that the judgment of the Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. v. CCE., Nagpur 1995 (12) TMI 72 - SUPREME COURT was not applicable to the present case inasmuch as in the present case, credit was reversed much after the clearance of the exempted goods and utilisation of the credit for the payment of duty on dutiable products. The Commissioner (Appeals) is also right in holding that the duty demand of over Rs. 2 crores in regard to a dispute about availability of over Rs. 6 lakhs credit is grossly unjust. In fact, impropriety and illegality are not with the Order of the Commissioner (Appeals); but with the present appeal. It is grossly improper for an administrative Commissioner to irresponsibly continue with a dispute to higher and higher appellate fora. Such a feud mentality brings no additional revenue to the exchequer. It only generates bad blood by heaping unmerited misery on the assessees. Further, appellate fora also get clogged with fruitless disputes. High time Government deviced a method to put down this irresponsible tendency on the part of administrative authorities, to file too many unwarranted appeals. Thus, the appeal of the Revenue is rejected as entirely lacking in merit and the impugned order of Commissioner (Appeals) is confirmed.

Summary

Issues involved:
The issues involved in the judgment are the reversal of Modvat credit for exempted goods, applicability of Rule 57CC, interpretation of Supreme Court judgment in M/s. Chandrapur Magnet Wires (P) Ltd. v. Collector of Central Excise, Nagpur, and the legality of the duty demand.

Summary:

1. Reversal of Modvat Credit and Rule 57CC:
The appellant reversed the Modvat credit for inputs used in the manufacture of exempted goods. The Assistant Commissioner demanded duty at 8% on the value of exempted products under Rule 57CC, resulting in a duty demand significantly higher than the credit amount. The Commissioner (Appeals) set aside the demand citing the Supreme Court judgment in M/s. Chandrapur Magnet Wires (P) Ltd. v. Collector of Central Excise, Nagpur, which held that reversal of Modvat credit is permissible for availing exemption. The Tribunal upheld the Commissioner's decision, stating that the reversal of Modvat credit amounts to non-availment of credit, thus rejecting the duty demand.

2. Applicability of Supreme Court Judgment:
The appeal was filed based on the direction to challenge the order. The appellant argued that the Supreme Court judgment was not applicable as the credit was reversed after clearance of exempted goods. However, the Tribunal, after reviewing the submissions and legal positions, upheld the Commissioner's order and the applicability of the Supreme Court judgment.

3. Circular No. 591/28/2001-CX:
The appellant also referenced Circular No. 591/28/2001-CX, which clarifies the recovery of incorrectly taken credit. The Tribunal agreed with the Commissioner that the duty demand was unjust and contrary to the circular, emphasizing the need to recover improperly taken credit rather than imposing excessive demands.

4. Confirmation of Commissioner's Order:
The Tribunal concurred with the Commissioner (Appeals) on the legal position, the Apex Court judgment, and the Circular of the Board. It criticized the appeal by the Revenue as lacking merit and confirmed the Commissioner's order, highlighting the impropriety of continuing disputes to higher appellate fora and the need for responsible administrative actions to avoid unnecessary appeals.

In conclusion, the Tribunal rejected the Revenue's appeal, upheld the Commissioner's order, and emphasized the importance of following legal positions and avoiding unjust demands in excise matters.