1994 (12) TMI 224 - AT - Central Excise

Modvat credit utilised for payment of duty on certain final products not shown in the declaration

Summary

Issues: Appeal against Order-in-Original for reversal of Modvat credit; Allegation of duty evasion; Penalty and confiscation imposed; Utilization of Modvat credit on undeclared final products.

Analysis:
The appeal was filed against an Order-in-Original that reversed Modvat credit taken for duty paid on inputs allegedly used in the manufacture of final products not declared. The Collector sought recovery of approximately Rs. 4.54 crores as duty payable, imposed a penalty of Rs. 5 lakhs, and confiscated plant and machinery. The appellant, represented by advocates, acknowledged the omission of declaring certain final products but argued it was due to a genuine misunderstanding during the initial phase of the Modvat scheme. They contended that even if credit is denied for certain items, it should be available for duty on declared final products. The appellant maintained that there was no intention to defraud duty, as they continued to pay duty on motor vehicles. The Tribunal noted that the inputs went into manufacturing declared final products, allowing credit adjustment in RG 23A & PLA, ensuring the disputed credit was not entirely extinguished.

The Tribunal found no deliberate evasion of duty or suppression of facts by the appellant. The omission to declare certain final products was not viewed as a wilful violation, as the appellant would have paid duty through PLA if objected by the Department. The Tribunal emphasized that the credit utilization on undeclared final products did not result in any financial gain for the appellant and did not fall under Rule 57C concerning exempted final products. The demand for an extended period and penalty imposition was deemed unsustainable, along with the order of confiscation of plant and machinery. The Tribunal referenced a similar case to support the adjustment of credit towards duty on declared final products despite the omission to declare certain items.

The Tribunal highlighted that while the Department's objection was technically valid, the demand was time-barred, and the suggested duty payment through PLA was not ordered due to lack of revenue implication. Ultimately, the appeal was allowed, granting relief to the appellant where necessary. The judgment emphasized the legitimate use of Modvat credit and the absence of fraudulent intent in the appellant's actions, leading to the decision in favor of the appellant.