2005 (5) TMI 101 - AT - Central Excise

Summary

Issues:
1. Appeal against order-in-appeal passed by Commissioner (Appeals) regarding reversal of credit in respect of inputs used in the manufacture of paper.
2. Interpretation of Notification No. 3/2001 dated 1-3-2001 and Rule 57AG of Central Excise Rules.
3. Liability for reversal of credit in respect of inputs lying in stock and contained in the final product based on the chosen benefit.

Analysis:
The appellant, engaged in paper manufacturing, appealed against the order-in-appeal by the Commissioner (Appeals) regarding the reversal of credit in respect of inputs used in paper production. The appellant opted for the benefit of Notification No. 3/2001 dated 1-3-2001, exempting duty for paper and paperboard manufactured with specific criteria. The Revenue issued a show cause notice for reversal of credit under Rule 57AG of Central Excise Rules, leading to confirmation of demand and imposition of a penalty by the adjudicating authority.

The appellant contended that they availed the notification benefit for a specific type of paper while paying duty for other types, using common inputs for all. They argued against the reversal of credit for inputs in stock and final products, emphasizing their compliance with credit reversal for papers under the notification. On the other hand, the Revenue argued that opting for Notification No. 3/2001 obligated credit reversal for inputs due to the duty exemption provided.

The Tribunal noted that the appellant manufactured various paper types, availing the notification benefit for specific paper types while paying duty for others. Rule 57AG(2) mandates payment equivalent to the credit allowed for inputs in stock upon opting for duty exemption. As common inputs were used across all paper types, the Tribunal deemed the reversal of credit for inputs in stock and final products unnecessary. The appellant's argument, supported by their practice of credit reversal for notified papers, was found meritorious, leading to the unsustainable demand being set aside, and the appeal being allowed.

In conclusion, the Tribunal's decision favored the appellant, recognizing their compliance with credit reversal for papers under the notification and deeming the demand for credit reversal in stock and final products as unwarranted. This judgment highlights the importance of understanding the specific criteria and obligations under notifications and rules governing duty exemptions in manufacturing processes.