1998 (2) TMI 329 - AT - Central Excise

Summary

Issues:
- Admissibility of Modvat credit on HDPE Sacks
- Time limitation for demand of duty under Section 11A
- Interpretation of Notification No. 35/90 dated 17-9-1990
- Suppression of facts and mis-statement of facts
- Imposition of penalty

Analysis:

The appeal involved a dispute regarding the admissibility of Modvat credit on HDPE Sacks used for packaging Caustic Soda and stable Bleaching Powder. The appellants argued that they had submitted a due declaration as required and that the impugned order was not based on a correct understanding of the law and facts. They contended that the notice issued in 1993 for repayment of Modvat credit availed between 1990 and 1992 was time-barred. The appellants maintained that the HDPE sacks were rightfully declared as inputs before the issuance of Notification No. 35/90 dated 17-9-1990, which excluded certain types of packaging materials from the definition of inputs under Rule 57A.

The Departmental Representative (DR) countered by asserting that the appellants had availed Modvat credit on HDPE Sacks during a period when such credit was not permissible under the amended Rule 57A post the issuance of Notification No. 35/90. The DR argued that the notification clearly excluded HDPE bags and sacks made from specific materials from being considered as inputs for availing Modvat credit. The DR emphasized that the extended period of limitation for demand of duty under Section 11A was applicable due to the appellants' continued availing of the credit on HDPE sacks despite the regulatory change.

The Tribunal noted the conflicting arguments and observed that while the appellants' initial declaration was in compliance with the then-existing rules, the subsequent amendment through Notification No. 35/90 altered the eligibility criteria for Modvat credit on HDPE bags and sacks. The Tribunal acknowledged that the notification was explicit in excluding such items from the definition of inputs, thereby rendering the appellants' continued availing of the credit post-amendment as unjustified. However, the Tribunal also highlighted the appellants' consistent reporting of the use of HDPE bags and sacks in their monthly statements, indicating no intent to suppress facts.

Ultimately, the Tribunal ruled in favor of the appellants by setting aside the demand for repayment but upheld the penalty imposed due to the appellants' continued claim of benefits no longer available post the regulatory amendment. The judgment underscored the importance of compliance with amended regulations and the consequences of persisting in availing benefits contrary to the revised legal framework, even if there was no deliberate suppression of facts.