2000 (10) TMI 414 - AT - Central Excise

Summary

Issues:
Challenge to validity of Order-in-Appeal confirming duty demand under Section 11A(2) of the Central Excise Act. Denial of Modvat credit to the appellants.

Analysis:
The appellants contested the validity of the Order-in-Appeal upholding the duty demand of Rs. 2,93,170/- confirmed by the Assistant Collector. The dispute arose from the appellants receiving duty paid single yarn for doubling and clearing the doubled yarn without payment of duty, leading to an alleged duty evasion. The appellants argued that doubling the yarn did not constitute manufacturing and claimed entitlement to the benefit of Rule 173H by filing declaration D-3. However, both the Assistant Collector and the Commissioner (Appeals) upheld the duty demand, which the appellants challenged in the appeal.

Regarding the duty demand, it was acknowledged that the appellants received duty paid synthetic single yarn for doubling and cleared the doubled yarn without paying duty. The Commissioner (Appeals) confirmed the duty liability, which was not disputed by the appellants' Counsel during the appeal hearing. The Counsel conceded that doubling single yarn amounts to manufacture under Chapter Note (2) of Chapter 55 of the Central Excise Tariff Act (CETA). The Counsel also recognized that the appellants were legally obligated to pay duty on the doubled yarn at the time of clearance, as per the specific provision in Chapter Note (2), despite the earlier judicial interpretation that favored the appellants.

The main contention raised during the appeal was the denial of Modvat credit to the appellants. The Counsel argued that the appellants were not informed by the Excise Department about their duty liability on doubled yarn when they submitted declaration D3, leading to a belief that they could clear the doubled yarn without paying duty. The Counsel asserted that the authorities should have allowed Modvat credit considering the appellants' use of duty paid single yarn for manufacturing doubled yarn. Reference was made to previous court decisions supporting the grant of benefits even in cases of technical non-compliance with procedural rules.

Upon review, the Tribunal found that the denial of Modvat credit was not explicitly based on the ineligibility of the appellants but rather on procedural grounds. The appellants had filed declaration D3 under the impression that Rule 173H applied to their situation. Since there was no communication from the Department indicating otherwise, the Tribunal concluded that the appellants' claim for Modvat credit deserved reconsideration. The impugned order was partially set aside to allow for the reassessment of the Modvat credit claim, while affirming the duty demand of Rs. 2,93,170/- on the appellants.

In conclusion, the appeal was disposed of with the decision to revisit the Modvat credit issue based on the circumstances and legal precedents cited, while upholding the duty demand confirmed by the Commissioner (Appeals).