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TMI Blog2004 (12) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... not admissible. It is important to note that the underlying object behind the notification was to utilise the credit against payment of duty on the final product. In the circumstances, the demand for differential duty, penalty and confiscation subject to payment of redemption fine is valid and justified. Accordingly, we answer the above question in the affirmative i.e. in favour of the department and against the appellants. Before concluding, we may clarify that our judgment is confined to the Notification No. 175/86-C.E., as it stood at the relevant time. X X X X Extracts X X X X X X X X Extracts X X X X ..... /86-C.E. dated 1-3-1986. On approval of the classification list, the appellants had cleared final products under sub-heading 90.24 and under sub-heading 84.23, after paying duty at the effective rate less 10%, as approved in their classification list. 6.On 26-10-1990, a show cause notice was issued to the appellants to show cause why differential duty of Rs. 3.15 lacs should not be recovered from them under Section 11A of Central Excises and Salt Act, 1944 read with rule 92 of the Central Excise Rules, 1944. By the said show cause notice, the proviso to section 11A relating to the extended period for demanding excise duty was invoked. By reply dated 24-2-1991, the appellants contended that they had not withdrawn their declaration filed und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal found that the appellants had received cast iron and castings (inputs) in their factory, which were exempt from duty and consequently, it was impermissible for the appellants to take Modvat credit in respect thereof. That as regards the steel bars, which were used as inputs by the appellants, the Tribunal found that the appellants had taken the benefit of concessional exemption without taking the Modvat credit and utilising it in the payment of duty on the final products. In the circumstances, the Tribunal found that the appellants had wrongly cleared the final products by paying concessional rate of duty in breach of the conditions in the notification No. 175/86-C.E., dated 1-3-1986 (as amended). The Tribunal further found that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.The object of the Modvat scheme was to reduce cost of final product by taking credit for the duty paid on the inputs. 11.The short point which arises for determination in the present case is - whether the appellants went on paying concessional rate of duty wilfully without availing of Modvat credit with intent to misutilise the Modvat scheme? 12.In order to answer the aforestated point, we reproduce herein below the relevant part of notification No. 175/86-C.E., dated 1-3-1986, as amended : "In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 85/85-Central Excises, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the clearances of the specified goods of an aggregate value not exceeding rupees sixty lakhs) immediately following the said clearances of the value specified in clause (a) from so much of the duty of excise leviable thereon which is specified in the said Schedule read with any relevant notification issued under sub-rule (1) of rule 8 of the said Rules or sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944) as is equivalent to an amount calculated at the rate of 10 per cent ad valorem : Provided that the amount of duty of excise payable on the specified goods under sub-clause (i) of clause (a), or as the case may be, under this clause, shall not be less than an amount calculated at the rate of 5 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible. In respect of cast iron and castings, Modvat credit was inadmissible as both these inputs were exempted, whereas in case of steel bars, the manufacturer did not avail of Modvat credit. Therefore, the appellants were not entitled to clear the final products at concessional rate of duty. Lastly, without reversing the credit, the appellants cleared the final products at the concessional rate of duty, in breach of the above notification, in favour of their sister concern and consequently, the said sister concern was not entitled to the benefit of higher credit which was admissible to manufacturers who bought goods as their inputs from small scale industrial units (appellants herein). 15.It was argued on behalf of the appellants that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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