2000 (5) TMI 633 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit and imposition of penalties.
2. Interpretation of Rule 57A of Central Excise Rules.
3. Limitation period for demanding duty.
4. Imposition of penalty under Section 11AC.

Analysis:

Issue 1: Disallowance of Modvat credit and imposition of penalties
The judgment involves a case where the ld. Commissioner disallowed Modvat credit and imposed penalties on the appellant under Rule 173Q of Central Excise Rules read with Section 11AC. The appellant, engaged in manufacturing ABS Polymers and Synthetic Rubber, availed Modvat credit for "Paper reinforced bags with liner" declared under Rule 57G. The Department alleged the bags were HDPE bags coated with paper, excluded for Modvat credit as per Rule 57A. The appellant argued no suppression of facts, citing consistency in declarations and duty paying documents. The Tribunal in similar cases held no suppression existed. The appellant's counsel emphasized the limitation aspect, asserting the demand was time-barred due to no deliberate suppression.

Issue 2: Interpretation of Rule 57A of Central Excise Rules
Rule 57A was amended with an exclusion clause regarding bags made from plastics woven fabric. The appellant declared goods as paper reinforced bags, consistent with duty paying documents pre and post-amendment. As the bags were traded as paper reinforced in the market, the Tribunal found no deliberate suppression for wrong Modvat credit availment. Citing the National Organic Chemical Inds. Ltd. case, the Tribunal held the demand as time-barred due to lack of deliberate suppression.

Issue 3: Limitation period for demanding duty
The Tribunal determined the demand as time-barred, as the appellant's declarations aligned with duty paying documents, and no deliberate suppression was evident. Consequently, the imposition of penalties under Rule 173Q of Central Excise Rules was deemed unnecessary.

Issue 4: Imposition of penalty under Section 11AC
The Tribunal noted the demand period was before the introduction of Section 11AC penalties, making such penalties inapplicable. Therefore, the penalty under Section 11AC was not imposable, and the appeal was allowed based on the limitation aspect. Consequential relief was directed to be granted to the appellants as per the law.

This judgment highlights the importance of consistency in declarations and duty documents, the interpretation of statutory provisions, and the application of limitation periods in excise duty cases.