1998 (9) TMI 340 - AT - Central Excise

Summary

Issues:
Appeal against Order-in-Appeal denying Modvat credit on certain goods under Central Excise Tariff Act, 1985.

Analysis:
The appeal pertains to the denial of Modvat credit on Simplex Fly Frames and Draw Frames used for producing cotton combed or carded goods under Heading 5202. The original order confirmed a demand of Rs. 1,85,624/- based on the ineligibility of final goods under Heading 5202 for Modvat credit. However, a subsequent notification amended the list, making such equipment eligible under Rule 57Q from 21-10-1994. The appellate authority allowed proportionate credit up to the amendment date and restored the balance under Rule 57-S. The Revenue contended that credit taken before the amendment date was not permissible under Rule 57Q as it only applied from 21-10-1994.

The Revenue argued that Rule 575 does not allow Modvat credit, which is specifically provided under Rule 57Q. Citing precedent, the Revenue highlighted that Modvat credit could not be availed before 21-10-1994. However, a circular allowing credit post debonding in certain cases prompted a reconsideration by the original authority.

Upon review, the Tribunal found that Modvat credit was not available before 21-10-1994 as per the plain reading of the notification. The Order-in-Appeal was set aside due to the lack of clarity on the basis for allowing 2.5% credit and the applicable law. The Tribunal emphasized the need for strict interpretation of notifications without any assumptions.

Regarding the penalty imposed on the respondents for wrongly taking Modvat credit, the Tribunal considered the bona fide dispute at the time of credit-taking, especially regarding the excisability of combed carded sliver under Heading 5202. Given the confusion and settled position post-dispute resolution, a lenient view was taken, reducing the penalty from Rs. 20,000 to Rs. 2,000.

In conclusion, the Tribunal set aside the Order-in-Appeal, restored the original order allowing Modvat credit, and reduced the penalty on the respondents. The appeal by the Revenue was disposed of accordingly.