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Home Case Index All Cases Central Excise Central Excise + AT Central Excise - 2002 (2) TMI AT This

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2002 (2) TMI 273 - AT - Central Excise

Issues:
- Disallowance of Modvat credit on duty paid inputs
- Applicability of Rule 57F(1) of the Central Excise Rules
- Liability for payment of duty under Section 11A(1) of the Central Excise Act
- Imposition of penalty on the appellants

Disallowance of Modvat credit on duty paid inputs:
The appellants, engaged in manufacturing HDPE/PP sacks, availed Modvat credit on duty paid inputs. Due to a labor dispute, they sold cut pieces of HDPE/PP fabrics to another party at a concessional rate of duty. The Adjudication Order disallowed the Modvat credit, directing the reversal of credit and imposing a penalty. The Commissioner of Appeals upheld this decision, stating that the inputs were not used for manufacturing sacks, the final product. The appellants argued that all Modvat scheme conditions were met, as the inputs were issued for processing and cutting. They referenced a Tribunal decision emphasizing the duty payment requirement for unused inputs. The Tribunal agreed that the duty equivalent to Modvat credit was payable, but allowed adjustment for any duty already paid by the appellants.

Applicability of Rule 57F(1) of the Central Excise Rules:
The dispute centered on whether cutting fabrics into required sizes constituted manufacturing. The Department argued that mere cutting did not qualify as manufacturing under Rule 57F(1). Citing a precedent, they contended that duty payable should not be less than the credit allowed for inputs. The Tribunal concurred, noting that the appellants sold the cut fabrics instead of manufacturing sacks, thus necessitating duty payment equal to the Modvat credit.

Liability for payment of duty under Section 11A(1) of the Central Excise Act:
The appellants disputed the duty demand under Section 11A(1) of the Central Excise Act, asserting that no violation occurred and no penalty should be imposed since there was no dishonesty. The Tribunal did not find any violation warranting a penalty, setting it aside based on the circumstances of the case.

Imposition of penalty on the appellants:
The Commissioner had imposed a penalty on the appellants for not using the inputs in manufacturing sacks. The Tribunal, however, found no grounds for penalty imposition, considering the absence of dishonest conduct. Consequently, the penalty was set aside in the final disposition of the appeal.

 

 

 

 

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