2004 (4) TMI 194 - AT - Central Excise

Summary

Issues:
1. Validity of demand under Section 11D of the Act.
2. Applicability of Section 11D to recovered amounts in excess of duty.
3. Interpretation of duty recovery from customers.
4. Correlation of duty liability under Section 3A with quantity of goods manufactured.
5. Application of Compound Levy Scheme.
6. Recovery of extra duty from buyers.
7. Disclosure of notional rate of duty in invoices.
8. Recovery of duty beyond contract price.
9. Contested duty demand on processed fabrics and suiting khakhi.
10. Modvat credit disallowance.

Issue 1: Validity of demand under Section 11D of the Act
The appeal contested the demand under Section 11D, arguing it was not applicable during the relevant period as duty was paid based on production capacity. Legal precedents were cited to support this claim.

Issue 2: Applicability of Section 11D to recovered amounts in excess of duty
The Department contended that separately shown duty in invoices implied independent recovery from customers. However, the appellants argued that they did not charge extra duty from buyers.

Issue 3: Interpretation of duty recovery from customers
The Tribunal found that the appellants sold goods to government departments at a contract price without extra duty. Mentioning duty separately in invoices did not mean extra charge to buyers.

Issue 4: Correlation of duty liability under Section 3A with quantity of goods manufactured
The duty liability was determined based on production capacity, not quantity of goods cleared. The duty was paid as per orders, and no extra duty was recovered from buyers.

Issue 5: Application of Compound Levy Scheme
Under the Compound Levy Scheme, duty liability was unrelated to quantity of goods cleared. The Tribunal held that the scheme applied to the case, supporting the appellants' argument.

Issue 6: Recovery of extra duty from buyers
The Tribunal noted that the appellants did not recover extra duty from buyers, as contract prices were fixed without additional duty payment stipulations.

Issue 7: Disclosure of notional rate of duty in invoices
The Tribunal clarified that mentioning duty rate in invoices did not imply extra charge to buyers. The appellants were not required to disclose notional duty rates as they operated under the Compound Levy Scheme.

Issue 8: Recovery of duty beyond contract price
The Tribunal found no evidence of recovering duty beyond the contract price. Legal precedents supported the appellants' position, leading to setting aside the duty demand under Section 11D.

Issue 9: Contested duty demand on processed fabrics and suiting khakhi
The appellants did not contest the duty demand on specific items, which had already been paid. The Tribunal upheld the duty confirmation on these items.

Issue 10: Modvat credit disallowance
The claim for Modvat credit was not pressed by the appellants, leading to the upheld decision of disallowing the credit.

In conclusion, the Tribunal partly allowed the appeal, setting aside the duty demand under Section 11D while upholding the duty confirmation on specific items and the disallowance of Modvat credit.