2004 (10) TMI 176 - AT - Central Excise

Summary

Issues: Appeal against demand of duty and penalty under Rule 57CC for non-maintenance of separate inventory and accounts for Modvat credit on inputs used in exempted goods.

In this case, the appellants cleared their product without payment of duty under a specific notification but availed Modvat credit on inputs used in the manufacture of the product. They failed to maintain separate inventory and accounts for the modvatable inputs as required by Rule 57CC(9). Consequently, a demand of Rs. 62,854/- with a penalty of Rs. 5,000/- was confirmed against them. The appellants contended that since they had reversed the entire Modvat credit, they should not be liable to pay duty at 8% of the price of the cleared goods under the exemption notification. However, the Tribunal held that the duty liability under Rule 57CC could not be avoided by merely reversing the Modvat credit, as the appellants did not comply with the requirement of maintaining separate inventory and accounts for the inputs used in the exempted goods. The Tribunal found no merit in the contention raised by the appellants and upheld the duty demand and penalty imposed by the authorities below.

Moreover, the appellants argued that there was no mechanism provided for the recovery of the amount under Rule 57CC, and therefore, the demand could not be confirmed. The Tribunal dismissed this argument as misconceived, stating that the recovery of the duty amount under the rule was justified due to the wrongful availment of Modvat credit by the appellants. The Tribunal distinguished the case cited by the appellants regarding non-recovery of amount under Rule 57CC, emphasizing that the facts of the present case warranted the duty demand and penalty. Consequently, the impugned order of the Commissioner (Appeals) was upheld, and the appeal of the appellants was dismissed.