1997 (4) TMI 288 - AT - Central Excise

Summary

Issues:
- Utilization of credit for inputs in final products
- Allegations of wrongly availed credit and imposition of penalty
- Maintenance of RG 23A Part II Account and segregation of credit

Analysis:

The case involved the appellants, manufacturers of final products under Chapter 20 and Chapter 21 of the Central Excise Tariff Act, 1985, who declared "OTS Cans" and glass bottles as inputs, respectively. The central issue was the utilization of credit for these inputs in the final products. The Revenue alleged that the appellants wrongly availed credit for "OTS Cans" and glass bottles not utilized in the respective final products. Show-cause notices were issued, demanding duty amounts and imposing penalties, leading to the appeals.

The appellant's representative argued that the manner of maintaining RG 23A Part II Accounts made it impossible to segregate credit utilization input-wise. As per the Modvat scheme, credit was to be used for duty payment on corresponding final products declared to have been used with those inputs. The appellant maintained that no credit was utilized for non-declared inputs, thus causing no revenue loss. Additionally, the representative contended that the imposed penalties were unwarranted.

After considering both parties' arguments, the Member (T) found merit in the appellant's plea. The maintenance of a common credit account for all inputs under RG 23A Part II made it impossible to determine input-wise credit utilization. The authority was aware of this practice, as the credit account was regularly submitted with monthly returns. The judgment highlighted that the common credit account's maintenance was in accordance with the rules, and no violation was demonstrated. Consequently, the demands for duty amounts and penalties were set aside.

In conclusion, the appeals were allowed, providing consequential relief to the appellants. The Member (T) directed the refund of the pre-deposited amount of Rs. 25,000 in compliance with the Tribunal's Stay Order. The judgment emphasized the importance of proper credit utilization in final products and the significance of maintaining accurate accounts to avoid wrongful allegations of credit misuse.