2004 (6) TMI 193 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on Lubricating Oil and Nitrogen Gas, Setting aside penalty and interest under Section 11AC.

Analysis:
The appeal concerns the denial of Modvat credit to the appellants on Lubricating Oil and Nitrogen Gas. Both authorities disallowed the credit amounting to Rs. 46,161/- on Nitrogen Gas and Rs. 1,63,805/- on Lubricating Oil as inputs. The appellants initially used these goods for job work but later started paying duty on manufactured goods and availed Modvat credit on both items. The credit on Nitrogen Gas had already been reversed by the appellants before the show cause notice, which was not confirmed by the authorities. However, the credit on Lubricating Oil was not utilized, and the appellants agreed to reverse it within one month from the receipt of the order.

The learned counsel argued for setting aside the penalty and interest imposed under Section 11AC, contending that the provisions were not applicable as the credit had not been utilized by the appellants. The Commissioner (Appeals) acknowledged that the credit on Lubricating Oil had not been utilized by the appellants, who had taken it in good faith upon starting to clear goods on duty payment. As the appellants agreed to reverse the credit within a month, the Tribunal found no grounds for imposing penalty and interest. Section 11AC, dealing with penalties for short payment or non-payment of duty, was deemed inapplicable to a case of wrong Modvat credit availment that was not utilized.

Consequently, the penalty and interest imposed on the appellants were set aside. The appellants were directed to reverse the credit within one month from receiving the order, failing which they would be liable to pay interest as per the law. The impugned order was modified accordingly, and the appeal was disposed of in the above terms.