1999 (7) TMI 159 - AT - Central Excise

Summary

Issues:
1. Availing Modvat credit and surrendering license for full exemption under Notification 1/93-C.E.
2. Recovery of credit of duty paid on inputs lying in stock and finished goods.
3. Utilization of Modvat credit and restoration of balance amount.
4. Dispute over retrenchment of credit on opting out of Modvat scheme.

Issue 1: Availing Modvat credit and surrendering license for full exemption under Notification 1/93-C.E.:
The respondents were availing Modvat credit on certain inputs for their final products before 1-4-1996 and intended to avail full exemption under Notification 1/93-C.E. They surrendered their license, but the authorities required payment for the credit taken on inputs in stock or finished goods on 31-3-1996. The respondents did not comply, leading to a show cause notice for recovery. The lower appellate authority found the utilization of credit and restoration of balance not in conformity with the law, but the credit of Rs. 24,217 was admissible. The Revenue appealed against this finding.

Issue 2: Recovery of credit of duty paid on inputs lying in stock and finished goods:
The Revenue contended that duty credit availed by the respondents on inputs in stock and finished goods on 31-3-1996 should be paid upon opting out of the Modvat scheme. The question was whether this credit should be retrenched from the credit account or paid from PLA. The judgment clarified that if there is a sufficient balance in the credit account, the duty credit on inputs should be retrenched from there; otherwise, it should be paid from PLA. In this case, there was enough balance in the credit account, so forcing the respondents to pay from PLA was against the law, specifically Rule 57H(5).

Issue 3: Utilization of Modvat credit and restoration of balance amount:
The lower appellate authority found the utilization of credit and restoration of balance by the respondents not in conformity with the law. However, it acknowledged that the credit of Rs. 24,217 was admissible as per Rule 57G of Central Excise Rules. The utilization of Rs. 17,304.58 out of this credit was deemed in order. The judgment highlighted that the utilization was permissible based on the rules, and the findings of the adjudicating authority were unsustainable on this count.

Issue 4: Dispute over retrenchment of credit on opting out of Modvat scheme:
The judgment clarified that the retrenchment of duty credit on inputs upon opting out of the Modvat scheme should be done from the credit account if there is a sufficient balance. If not, the amount should be paid from PLA. In this case, as there was enough balance in the credit account, the respondents were not required to pay from PLA. The Revenue's appeal was dismissed as the demand for payment was deemed against the provisions of Rule 57H(5).

This comprehensive analysis of the judgment covers the issues involved and the legal interpretations provided by the Appellate Tribunal CEGAT, New Delhi.