1999 (6) TMI 155 - AT - Central Excise

Summary

Issues:
1. Eligible inputs for the manufacture of glass bottles.
2. Admissibility of Modvat credit on capital goods.
3. Re-adjudication by lower authority after the issue is decided by the Commissioner.

Eligible Inputs for Glass Bottles:
The dispute revolved around the eligibility of inputs for glass bottle manufacturing. The assessees claimed certain inputs, which were later deemed ineligible by the department, leading to disallowance of Modvat credit. The Collector (Appeals) ordered de novo proceedings based on the principle of natural justice, but the department failed to act on this order for ten years. Eventually, the assessees took the previously disallowed credit in 1996, prompting a show cause notice in 1997 proposing disallowance. The jurisdictional Commissioner confirmed the duty, imposed penalties, and demanded interest. However, the Tribunal found flaws in the notice issued by the Commissioner, stating it lacked specific reasons for disallowance, thus violating principles of natural justice. Consequently, the Tribunal set aside the Commissioner's order and directed proceedings as per the Collector (Appeals) order.

Admissibility of Modvat Credit on Capital Goods:
The reference application questioned the admissibility of Modvat credit on capital goods before the inception of Rule 57Q of Central Excise Rules under Rule 57A. Additionally, it raised the issue of whether a decision by the Commissioner following proper procedure necessitates re-adjudication by a lower authority. The Tribunal noted that the Commissioner misunderstood the scope of Section 35G of the Central Excise Act, emphasizing that this section is for substantial legal questions arising from CEGAT orders, not for contesting orders' propriety. The Tribunal criticized the Commissioner for failing to inform the assessees properly about the grounds for disallowance, leading to a violation of natural justice principles.

Re-adjudication by Lower Authority:
The Tribunal clarified that Section 35G of the Central Excise Act is not meant for challenging the legality of CEGAT orders but for clarifying legal provisions through the High Court. The Tribunal found no merit in the Commissioner's application, highlighting the failure to understand the Tribunal's order and the misuse of Section 35G. Ultimately, the application was dismissed.

In conclusion, the judgment addressed the issues of eligible inputs for glass bottles, the admissibility of Modvat credit on capital goods, and the re-adjudication process after a decision by the Commissioner. It emphasized the importance of following principles of natural justice, clarified the purpose of Section 35G, and dismissed the application due to a lack of merit.