2017 (2) TMI 944 - AT - Central Excise

MODVAT credit - whether the Respondent No.1 were using pinion distance of 415 mm Rolling stand for manufacture of 6 mm dia rods or not? - Held that - respondent no. 1 was not using pinion distance of 415 mm Rolling stand for manufacture of 6 mm dia rods - Revenue s allegation that respondent utilized the modvat credit and recovered the same from their customers is not based on any documentary and other evidence to established the fact that the respondent received back the duty credit utilized by them from their customers in cash. Credit allowed - Appeal dismissed - decided against Revenue.

Issues:
1. Interpretation of Section 3A of Central Excise Act, 1994 regarding duty liability.
2. Verification of pinion distance for availing Modvat Credit.
3. Compliance with Compound Levy Scheme under Rule 96 ZP of Central Excise Rules.
4. Application of Notifications 31/97-CE and 43/97-CE (NT) regarding rolling mills' duty liability.
5. Utilization of modvat credit and recovery from customers.
6. Adequacy of evidence to support revenue's allegations.

Interpretation of Section 3A:
The Commissioner appealed against an order where duty demand of ?7,38,59,372 was not sustained under Section 3A of the Act. The Revenue argued that if the respondent used a pinion distance of 415 mm for manufacturing 6 mm dia rods, they could avail Modvat Credit. However, it was found that the respondent had a pinion of 260 mm, not 415 mm. The adjudicating authority erred in accepting the respondent's claim without technical verification. The respondent's rolling mill setup did not align with the requirements under Section 3A, as ribbing operations on 6 mm rods were not feasible.

Verification of Pinion Distance:
The respondent declared a pinion size of 415 mm before the exclusion notification for mills above 411 mm. The respondent's expert failed to consider the production capacity accurately. The duty liability under compound levy or Section 3 was a crucial point. The Commissioner noted discrepancies in the expert's assessment and the respondent's declarations, leading to doubts about the actual pinion setup and the machinery's capacity for specific operations.

Compliance with Compound Levy Scheme:
The respondent's compliance with the Compound Levy Scheme was questioned based on the size of the pinion stand. Declarations made before the exclusion notification and subsequent clarifications indicated a deliberate attempt to avoid duty liability under the compound levy scheme. The issue of whether the respondent fell under Section 3 or Section 3A for duty payment was central to the case.

Application of Notifications on Duty Liability:
Notifications 31/97-CE and 43/97-CE (NT) outlined duty liability based on the size of pinion stands. The respondent's declarations and subsequent clarifications regarding the pinion size raised concerns about their eligibility under the compound levy scheme. The duty payment mechanism under Section 3 or Section 3A was crucial in determining the correct duty liability for the respondent's operations.

Utilization of Modvat Credit:
The Revenue alleged that the respondent utilized modvat credit and passed on the duty burden to customers. However, there was a lack of concrete evidence to support this claim. The absence of documentation or proof regarding the recovery of duty credit from customers weakened the Revenue's argument, highlighting the importance of substantiating allegations with factual evidence.

Adequacy of Evidence:
The impugned order highlighted the Revenue's reliance on incomplete expert opinions and lack of substantial evidence to support their claims. The Commissioner observed that the Revenue's allegations were unfounded and unsustainable due to incomplete reports and insufficient proof. The dismissal of the Revenue's appeal emphasized the necessity of presenting concrete evidence to substantiate claims in legal proceedings.

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