1997 (8) TMI 257 - AT - Central Excise

Summary

Issues:
Challenge to Order-in-Original for duty demand and penalty imposition based on Modvat credit availed for exempted final product without disclosure.

Analysis:
The appellants challenged Order-in-Original No. 100/95, demanding duty and imposing a penalty for availing Modvat credit on inputs used in the manufacture of an exempted final product without proper disclosure. The appellants filed declarations under Rule 57G for Modvat credit but did not mention the exempted product, flexible layflat tubing, in their declarations. They cleared this exempted product at nil duty rate but availed Modvat credit on inputs used for all final products, including the exempted one. The Department alleged suppression of facts regarding the use of inputs for exempted goods, leading to the demand-cum-show cause notice.

The appellants contended that Modvat credit was admissible regardless of exempted final products, citing a Tribunal decision. They argued that they did not suppress information as they declared both dutiable and exempted goods and submitted monthly returns with all relevant details. The Commissioner, however, noted the absence of the exempted product in the declarations and ruled against the appellants, emphasizing the need to disclose all final products for Modvat credit eligibility. The Commissioner distinguished a previous Tribunal decision where common inputs were used for the same final product, unlike the current case with different end-products, one being exempted from duty.

The appellants, represented by counsel, argued that they believed they were not required to reverse credit for inputs used in exempted goods since they disclosed details in various documents regularly submitted to the Department. They emphasized that statutory documents reflected all necessary information, and any oversight was not intentional suppression. They cited Supreme Court decisions regarding the limitation period for demands beyond six months and challenged the Department's justification for invoking the extended limitation period based on the same filed documents without additional evidence of suppression.

After considering both sides' arguments, the Judge referred to a Tribunal decision establishing the prohibition on availing Modvat credit for inputs used in exempted final products. The Judge found that the appellants' failure to disclose the exempted final product in their declarations rendered their appeal meritless. Additionally, the Judge rejected the appellants' contention of a bona fide mistake, noting the mention of the exempted product in the Classification List. Consequently, the Judge upheld the impugned order, rejecting the appeal and affirming the duty demand and penalty imposition.

In conclusion, the Judge dismissed the appeal, upholding the impugned order based on the failure to disclose the exempted final product for Modvat credit eligibility and rejecting the contention of a bona fide mistake. The decision emphasized the importance of full disclosure in declarations and upheld the duty demand and penalty imposition for availing Modvat credit on inputs used in the manufacture of an exempted product without proper disclosure.