1997 (10) TMI 148 - AT - Central Excise

Issues Involved:
1. Utilization of Modvat credit on inputs for payment of duty on different final products.
2. Determination of whether cars and LCV/HCVs are "similar products" under Rule 57F(4).
3. Eligibility for refund of duty credit on exported goods.
4. Adjustment of capital Modvat credit under Rule 57Q.
5. Validity of penalty imposed under Rule 173Q(1)(a).

Issue-wise Detailed Analysis:

1. Utilization of Modvat credit on inputs for payment of duty on different final products:

The appellants maintained a consolidated Modvat credit account under Rule 57A, recording all inputs received and utilizing the credit for final products. The Central Excise Department contested this, arguing that the duty payable on cars (Tata Estate/Tata Sierra) was substantially higher than the Modvat credit available on inputs used in their manufacture. Conversely, the duty payable on LCV/HCV and their chassis was less than the Modvat credit available. The Department alleged that the appellants improperly utilized surplus Modvat credit from LCV/HCV inputs to pay duty on cars, contrary to the requirement that inputs must be used in the manufacture of the specific final product.

2. Determination of whether cars and LCV/HCVs are "similar products" under Rule 57F(4):

The appellants argued that LCV/HCVs and passenger cars are "similar products" under Rule 57F(4), citing the Tribunal's decision in Hindustan Motors v. CCE, which interpreted "similar" in the context of Modvat credit as not requiring identical products. The Tribunal held that "similar" should be given a broader meaning, encompassing products within the same chapter of the Central Excise Tariff Act (CETA). The Department countered, stating that "similar" should mean identical or very closely related products, which cars and LCV/HCVs are not.

3. Eligibility for refund of duty credit on exported goods:

The appellants contended that if cars and LCV/HCVs are not considered similar, they should be eligible for a refund of duty credit on LCV/HCVs exported under bond. The Tribunal decision in Hindustan Motors supported this view, stating that if adjustment of credit is not possible, a refund should be granted. The Department argued that refund claims must comply with statutory limitations and conditions, which the appellants had not fulfilled.

4. Adjustment of capital Modvat credit under Rule 57Q:

The appellants sought to adjust capital Modvat credit under Rule 57Q for payment of duty on passenger cars, claiming this was permissible. The Department contended that such credit had already been utilized, leaving no room for further adjustment.

5. Validity of penalty imposed under Rule 173Q(1)(a):

The Commissioner imposed a penalty of Rs. 1.00 lac under Rule 173Q(1)(a), attributing mala fides to the appellants. The appellants argued that no mala fides could be attributed, and the penalty should be set aside.

Judgment:

The Tribunal allowed the appeal in part, holding that:

1. The appellants can utilize Modvat credit on inputs used in the manufacture of LCV/HCVs exported under bond for payment of duty on passenger cars (Tata Sierra/Tata Estate), considering them similar final products under Rule 57F(4).
2. The demand should be redetermined after adjusting the verified amount of Rs. 18,05,95,569 representing Modvat credit on exported LCV/HCVs.
3. The Commissioner should consider the appellants' plea regarding the opening balance in RG 23A Part II as on 1-5-1994, verifying particulars provided by the appellants.
4. The penalty imposed on the appellants is set aside, as no mala fides were attributed.

The appeal was thus disposed of with directions to redetermine the demand and consider the appellants' claims on merits.

← Previous Next →