1996 (10) TMI 240 - AT - Central Excise

Summary

Issues:
Recovery of Modvat credit, imposition of penalty, time limitation for demand.

Analysis:
The appeal stemmed from an order by the Collector of Central Excise, Meerut, directing the recovery of Modvat credit amount and imposing a penalty on the appellants. The appellants, pharmaceutical manufacturers, had agreements with customers for exporting products, paying excise duty utilizing Modvat credit. A show cause notice was issued seeking recovery of refunded amount, contending the products were not entitled to rebates due to incorrect classification. The impugned order confirmed recovery and penalty, leading to this appeal.

The main argument raised by the appellants focused on the demand being time-barred by limitation. The appellants contended that they provided necessary information for correct classification, relying on past judgments supporting their belief. The Supreme Court's reversal of a relevant judgment occurred after the show cause notice, and the appellants were not guilty of suppression or misdeclaration to evade duty. The department argued the appellants misused Modvat credit by paying duty on products not attracting duty, thus justifying the extended limitation period.

Upon careful consideration, the tribunal found merit in the appellant's contentions. The appellants did not suppress material facts or misdeclare, as they provided samples and labels for classification approval. The department could have revised the classification within six months if deemed incorrect. Previous tribunal judgments and the belief based on legal precedents supported the appellants' classification. The reversal by the apex court post-show cause notice did not indicate intent to evade duty. The circular issued by the Board further confirmed the appellants' belief. Consequently, the tribunal held the extended limitation period inapplicable, deeming the demand time-barred. The impugned order was set aside solely on this ground, allowing the appeal without delving into the merits.