2005 (3) TMI 323 - AT - Central Excise

Summary

Issues: Availability of Modvat credit on inputs utilized in final product exempt from duty, Imposition of penalty on the respondents

Availability of Modvat Credit on Inputs Utilized in Final Product Exempt from Duty:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the issue of the availability of Modvat credit to the respondents on inputs used in the final product exempt from duty. The respondents, engaged in manufacturing I.V. fluids, were availing Modvat facility on inputs used in their final product. The final product became exempt from duty as per notifications dated 1-3-2000 and 4-5-2000. The Commissioner (Appeals) denied credit on inputs in stock on the date of the notification but allowed credit on inputs used in final products. The Tribunal referred to its judgment in CCE, Ghaziabad v. Explicit Trading & Marketing, stating no credit is admissible on inputs in stock when the finished product is exempt from duty. The Tribunal rejected the reliance on Albert David Ltd. v. CCE, Meerut, emphasizing that Cenvat credit is not allowed on inputs used in the manufacture of exempted goods. The Tribunal upheld the appeal, setting aside the impugned order.

Imposition of Penalty on the Respondents:
Regarding the penalty imposed on the respondents for wrongly availing credit, the Tribunal agreed with the contention that a penalty was warranted as the respondents had availed credit not available under the law. The respondents argued that since a substantial portion of the duty had been paid before the show cause notice, no penalty should be imposed. However, the Tribunal disagreed, imposing a penalty of Rs. 50,000 on the respondents. The Tribunal considered the payment of duty but held that it did not warrant a total waiver of the penalty. The appeal of the Revenue was allowed with consequential relief, and the penalty was upheld based on the circumstances of the case.

In conclusion, the Appellate Tribunal CESTAT, New Delhi addressed the issues of Modvat credit availability on inputs in a final product exempt from duty and the imposition of a penalty on the respondents. The Tribunal ruled in favor of the Revenue, denying credit on inputs in stock when the final product is exempt from duty and imposing a penalty on the respondents for wrongly availing credit. The judgment highlighted the importance of adhering to Cenvat credit rules and upheld the penalty despite partial payment of duty by the respondents.