2006 (6) TMI 46 - AT - Central Excise

Central Excise Modvat credit Assessee has not to be paid amount equal to 8% of value of exempted final goods but they have to reverse the credit taken on inputs used in manufacture of exempted final goods

Summary

Issues:
1. Interpretation of provisions of Rule 57CC of Central Excise Rule.
2. Liability of respondents to pay 8% of price of exempted goods.
3. Reversal of Modvat credit as per CBEC Circular dated 16.10.2001.
4. Applicability of Circular on recovery of credit taken incorrectly.
5. Judicial precedents regarding recovery of 8% of price of final product under Rule 57CC.

Analysis:
The Appellate Tribunal in New Delhi heard an appeal filed by the Revenue against the order-in-appeal by the Commissioner (Appeals). The Commissioner had relied on a Board's Circular dated 16.10.2001 and a Tribunal's decision in a previous case to rule that recovery of 8% of the price of impugned goods could not be made, but the respondent had to reverse Modvat credit on inputs used in manufacturing the goods. The Revenue contended that under Rule 57CC of the Central Excise Rule, the respondents were liable to pay 8% of the price of exempted goods as they were manufacturing and clearing goods both on duty payment and under exemption notification.

The respondents argued that as per the Board's Circular, they were only required to reverse the credit, and the impugned order was in accordance with Central Excise Rules. The Commissioner (Appeals) held that the appellant needed to reverse Modvat credit only to the extent of duty involved on inputs used in manufacturing machines cleared free of duty. The Tribunal, citing various judgments, including Jindal Vijayanagar Steels Ltd. and M/s. SAIL Bokaro Steel Plant, held that recovery of 8% of the price of the final product could not be claimed from the assessee under Rule 57CC of the Central Excise Rules as there was no provision for such recovery under Section 11A of the Central Excise Act.

The Revenue did not deny the existence of the Circular in the Grounds of Appeal, and no contrary instructions were cited. The Tribunal found no infirmity in the Commissioner (Appeals) order as it was passed in view of the Circular issued by the Board. Therefore, the appeal was dismissed, and the order was dictated and pronounced in open court on 27.6.2006.