1997 (11) TMI 287 - AT - Central Excise

Summary

Issues:
1. Stay application seeking waiver of pre-deposit for duty and penalty imposed by the Commissioner of Central Excise, Jaipur.
2. Dispute regarding the utilisation of Modvat Credit on Polyamide Chips arising from Caprolactum for the manufacture of Nylon Filament Yarn.
3. Challenge to the findings of the adjudicating authority on the plea for utilisation of Modvat Credit.
4. Consideration of the admissibility of Modvat Credit to meet part of the duty demand.

Analysis:

The judgment by the Appellate Tribunal CEGAT, New Delhi dealt with a stay application requesting the waiver of pre-deposit for a duty amount of Rs. 17,33,624/- and a penalty of Rs. 50,000/- imposed by the Commissioner of Central Excise, Jaipur. The duty demand and penalty arose from the production of Polyamide Chips as intermediate products from Caprolactum for the manufacture of Nylon Filament Yarn. The applicant had initially reversed the Modvat Credit on Caprolactum due to the exemption of Nylon Filament Yarn from duty. However, a subsequent duty demand was raised on the Polyamide Chips, leading to the dispute over the utilisation of the reversed credit.

The Learned Counsel for the applicant contested the adjudicating authority's findings on the plea for utilisation of Modvat Credit. They argued that the reversal of credit was done when neither the Polyamide Chips nor the Nylon Filament Yarn attracted any duty. The Counsel focused on the Modvat aspect in the stay application, questioning the authority's decision regarding the credit utilisation request and the valuation aspect.

The argument put forth by the applicant was opposed by the learned DR, who referred to the Commissioner's findings in the impugned order. The Commissioner had rejected the plea for credit utilisation, stating that it would have been relevant only if duty had been paid on the Polyamide Chips, which was not the case as they were related to the final product cleared duty-free. The Commissioner found the plea untenable based on this reasoning.

Upon considering the submissions, the Tribunal agreed with the applicant's Counsel that a prima facie case existed regarding the admissibility of Modvat Credit to offset part of the duty demand. The Tribunal noted that the reversal of credit on Caprolactum was linked to the duty exemption on Nylon Filament Yarn, and since duty was now sought on the Polyamide Chips, the credit restoration request seemed justified. Consequently, the Tribunal directed the applicant to deposit a reduced sum of Rs. 5,17,784/- within a specified period, after adjusting the Modvat Credit, and waived the pre-deposit of the remaining duty and penalty for the appeal hearing, subject to compliance with the terms of the stay order.