2009 (7) TMI 1119 - AT - Central Excise

Summary

Issues:
1. Denial of benefit of deemed Modvat credit under Notification No. 29/96-C.E.
2. Interpretation of condition 4 of the notification regarding credit on specified inputs and final products.
3. Classification of Light Diesel Oil (LDO) as a consumable under the notification.
4. Application of Tribunal's judgment in Sky Industries Ltd. v. CCE regarding LDO.
5. Treatment of reversed credit on LDO for the availability of deemed credit on other inputs.
6. Justification for confirming the demand against the appellants.

Analysis:

The judgment by the Appellate Tribunal CESTAT Ahmedabad dealt with the confirmation of duty demand against the appellants for Rs. 2,00,40,113, concerning the denial of deemed Modvat credit under Notification No. 29/96-C.E. The denial was based on the appellants contravening condition 4 of the notification by availing Modvat credit on Light Diesel Oil (LDO) during the period from July 2002 to February 2003. Condition 4 of the notification allows credit on specified inputs like yarn, fibres, dyes, chemicals, and consumables for the manufacture of specified final products, including fabrics falling within specific heading numbers.

The appellants argued that LDO, used as fuel, does not fall under the category of consumables covered by the notification, thus not violating condition 4. However, the Tribunal referenced the judgment in Sky Industries Ltd. v. CCE, Mumbai, where a similar contention regarding LDO not being a consumable was rejected. The Tribunal found no reason to deviate from this established view.

Nevertheless, the Tribunal acknowledged the appellants' reversal of the entire credit taken on LDO, which led to a situation where it was deemed as if no credit was taken at all. Citing the decision in Maize Products case, the Tribunal recognized that even post-order reversals could be treated as non-availment of credit. In the present case, the appellants had reversed Rs. 16.11 lakhs of credit on LDO, indicating compliance with this principle.

Considering these facts, the Tribunal concluded that there was no justification for confirming the demand against the appellants by denying the benefit of the notification in question. Consequently, the appeal was allowed with consequential relief, emphasizing the importance of the specific circumstances and compliance actions taken by the appellants in determining the availability of deemed credit on other inputs.