1999 (5) TMI 342 - AT - Central Excise

Summary

Issues: Modvat credit denial, Interpretation of Notification No. 177/86, Actual duty paid

Modvat Credit Denial:
The case involved appeals against an order denying Modvat/money credit to the manufacturer of biscuits for inputs used in the manufacturing process, specifically vanaspati. The Collector (Appeals) had restricted the credit to the duty actually paid, contrary to the appellant's claim for Modvat credit. The appellant argued that the duty paid was Rs. 1500 per M.T., but the authorities contended that only Rs. 500 was paid, leading to the denial of the credit.

Interpretation of Notification No. 177/86:
The dispute centered around Notification No. 177/86, which restricted the Modvat credit for specific duties paid on inputs like vanaspati. The appellant maintained that they were entitled to credit at the rate of Rs. 900 per M.T. as per the notification. The appellant's counsel highlighted the provisions of the notification and emphasized the actual duty paid at Rs. 1500 per M.T., challenging the authorities' interpretation.

Actual Duty Paid:
The core issue revolved around the actual duty paid by the appellant for vanaspati, as reflected in the Gate Pass form and related documents. The authorities argued that only Rs. 500 was paid, while the appellant contended that Rs. 1500 per M.T. was paid, as evidenced by the Gate Pass and debits in RG 23A and RG 23B registers. The disagreement on the amount paid and the correct interpretation of the duty payment led to the denial of Modvat credit.

The Tribunal, after considering the contentions of both parties, found that the authorities' conclusions regarding the duty payment were factually incorrect. The Tribunal emphasized that the debit entries in RG 23A and RG 23B registers constituted payment, contradicting the authorities' assertions. Additionally, the Tribunal highlighted the need to read Notification No. 177/86 in conjunction with other relevant sections to interpret the credit restrictions accurately.

The Tribunal disagreed with the authorities' view that the remaining duty amount was set-off or considered as discharged from a cash subsidy, as it was not raised in the show cause notice. The Tribunal concluded that the appellant had indeed paid Rs. 1500 per M.T. for vanaspati, as evidenced by the duty-paying documents, and was entitled to claim Modvat credit at the rate specified in Notification No. 177/86. Consequently, the appeals were allowed in favor of the appellant, granting them the relief sought in accordance with the law.