1997 (12) TMI 284 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on packing material used for final product.
2. Allegations of procedural non-compliance and evasion of duty.
3. Limitation period for issuance of Show Cause Notice (SCN).
4. Requirement of prior permission for transfer of packing material.

Detailed Analysis:

1. The case involved the denial of Modvat credit on thermocol packing material used for packing black and white picture tubes due to the same material being used for packing glass shells, which attracted nil central excise duty. The appellant argued that despite a technical non-compliance with Rule 57F(2), the substantive benefit of Modvat credit should not be disallowed. The appellant contended that the delayed issuance of the SCN, three years and 7 months after the application under Rule 57F(2), was beyond the limitation period. The appellant also highlighted that the Commissioner did not find any suppression of facts but concluded that there was a contravention of rules to evade duty.

2. The respondent argued that the transfer of packing material to input suppliers was not compliant with Rule 57F(1)(ii) and Rule 57F(2). The clearance of packing material was done through private gate passes, and the credit obtained for such clearances was utilized in violation of the rules. The respondent emphasized that the stay application should be rejected based on these procedural irregularities.

3. The Tribunal acknowledged the arguments from both sides. While the appellant did not dispute the lack of prior permission for transferring packing materials to input manufacturers, the Tribunal noted the arguable points raised by the appellant's representative regarding the denial of Modvat credit solely on procedural grounds. Due to the complexity of the legal issues and evidence involved, the Tribunal directed the appellant to deposit Rs. Five lakhs by a specified date, with the matter scheduled for further consideration after compliance. The Tribunal also ordered that demand/recovery would be stayed pending the appeal's outcome.

4. The Tribunal cautioned the appellant that failure to comply with the deposit directive would result in the dismissal of their appeal without further notice. This emphasized the importance of adhering to the Tribunal's orders to ensure the continuation of the appeal process.