1998 (2) TMI 318 - AT - Central Excise

Summary

Issues:
Whether unbranded chewing tobacco utilized in the manufacture of branded chewing tobacco during a specific period is liable to duty, and if Modvat credit is available.

Analysis:
The judgment revolves around the liability of unbranded chewing tobacco (UBCT) to duty during a particular period and the availability of Modvat credit. Initially, UBCT was made liable to duty from 1-3-1994, while branded chewing tobacco (BCT) had been taxed earlier. A notification allowed set off duty paid on UBCT when used in manufacturing BCT. However, the procedure was later scrapped, and a new notification brought chewing tobacco under the Modvat scheme. The appellants failed to follow the new procedure, assuming the old rules applied until 11-8-1994 when UBCT was exempted from duty if used in BCT manufacturing. The central excise authorities demanded duty and imposed a penalty on the appellants.

The appellants argued that a similar issue was decided in their favor by the Commissioner (Adjudication) Delhi, allowing Modvat credit for duty paid on UBCT. The Tribunal acknowledged the Delhi decision and noted that the Revenue did not appeal against it. The Tribunal dismissed the current appeal but directed the appellants to pay the duty amount and take Modvat credit as per the Delhi Commissioner's order. The penalty of Rs. 1,00,000 was set aside due to the lack of mens rea in not paying the duty.

The Tribunal found no grounds for imposing a penalty and directed the appellants to pay the duty amount of Rs. 3,12,27,638.40, allowing them to take Modvat credit for the same towards BCT duty payment. The appellants were instructed to follow the Modvat scheme procedure outlined in the Delhi Commissioner's order. The penalty of Rs. 1,00,000 was waived, and the appeal was disposed of accordingly.