2004 (3) TMI 209 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit on Caustic Soda & Chlorine.
2. Imposition of penalty.
3. Disallowance of Modvat credit on Kraft paper.
4. Applicability of Section 11B of the Central Excise Act, 1944.
5. Modvat credit on packing material.
6. Restoration of Modvat credit.

Analysis:
1. The Appellate Tribunal addressed the disallowance of Modvat credit on Caustic Soda & Chlorine used in the manufacture of exempted intermediate products. The Tribunal noted that the Modvat credit cannot be denied simply because exempted intermediate products are used in the manufacture of final dutiable products. Relying on a previous judgment, the Tribunal allowed the appeal in favor of the Appellants regarding the Modvat credit on Caustic Soda & Chlorine.

2. Regarding the imposition of a penalty, the Tribunal found that the penalty imposed under Rule 173Q was set aside by the Commissioner of Appeals. However, the Tribunal upheld the penalty of Rs. 5,000 under Rule 173Q as legally proper and sustainable since the lower authority had allowed the Modvat credit on merits.

3. The disallowance of Modvat credit on Kraft paper was not specifically addressed in the detailed analysis provided in the judgment.

4. The issue of the applicability of Section 11B of the Central Excise Act, 1944 was discussed. The Tribunal clarified that the reasoning given by the Commissioner of C. Excise (Appeals) that the Appellants were required to follow the procedure under Section 11B for filing a refund claim was not legally correct. Since the Modvat credit was disallowed, the provisions of Section 11B were deemed inapplicable.

5. The Tribunal considered the Modvat credit on packing material used during a specific period. The Appellants argued that they could not avail the credit due to a dispute and that there was no time limit restriction for availing Modvat credit as per the prevailing rules. The Tribunal did not accept the Appellants' argument for claiming Modvat credit on the packing material due to the unresolved dispute.

6. Lastly, the issue of restoration of Modvat credit was discussed. The Tribunal highlighted that there was no provision for the restoration of Modvat credit in the Central Excise Act, 1944. The Appellants were required to follow the procedure under Section 11B by filing a refund claim, which they failed to do. Therefore, the Modvat credit reversed by the Appellants was considered time-barred.

In conclusion, the Appellate Tribunal partially allowed the appeal concerning the Modvat credit on Caustic Soda & Chlorine, upheld the penalty imposed, and addressed the applicability of Section 11B of the Central Excise Act, 1944, while also discussing the issue of Modvat credit on packing material and restoration of Modvat credit.