2001 (1) TMI 498 - AT - Central Excise

Summary

Issues Involved:
1. Availability of exemption Notification No. 64/95-C.E., as amended by Notification No. 116/95-C.E.
2. Limitation period for raising the demand.
3. Availability of Modvat credit.
4. Imposition of penalty and interest u/s 11AC and 11AB of the Central Excise Act, 1944.

Summary:

1. Availability of Exemption Notification:
The primary issue in the appeal is the availability of exemption Notification No. 64/95-C.E., dated 16-3-1995, as amended by Notification No. 116/95-C.E., dated 13-11-1995, for railway wagons manufactured by the appellants. The exemption was contingent on the wagons being intended for use by and owned by the Indian Railways or Konkan Railway Corporation Ltd. The Revenue argued that the wagons, procured under the 'Own Your Wagon Scheme' (OYW scheme) by Indian Railways for M/s. TISCO, did not meet the ownership condition, as the cost was borne by M/s. TISCO, making them the owners. The Tribunal upheld the Revenue's view, stating that the ownership vested in M/s. TISCO, not Indian Railways, thereby denying the exemption.

2. Limitation Period for Raising the Demand:
The appellants contested the demand raised via a show cause notice dated 1-5-1998 for the period 17-2-1996 to 12-10-1996, arguing it was barred by limitation. The Tribunal noted that the Commissioner did not adequately address the appellants' plea of limitation and remanded the matter for fresh consideration on this point, emphasizing that the intention to evade duty must be established for invoking the longer period of limitation u/s 11A.

3. Availability of Modvat Credit:
The appellants claimed entitlement to Modvat credit for the duty paid on inputs used in manufacturing the wagons, which was initially denied due to non-following of the Modvat procedure. The Tribunal agreed with the appellants, citing precedents that allow Modvat credit in cases of subsequent duty demands, irrespective of procedural lapses. The matter was remanded to the Commissioner to verify and adjust the Modvat credit accordingly.

4. Imposition of Penalty and Interest:
The appellants challenged the imposition of penalty u/s 11AC and interest u/s 11AB, arguing these provisions, effective from 28-9-1996, could not apply retrospectively. The Tribunal concurred, referencing multiple decisions supporting this view. However, the Tribunal noted the show cause notice also proposed a penalty u/r 173Q and directed the Commissioner to consider this aspect upon remand. The appeal was thus rejected on merits but remanded on the points of limitation, Modvat credit adjustment, and applicability of penalty and interest provisions.