2005 (11) TMI 286 - AT - Central Excise

Summary

Issues:
1. Appeal against Order-in-Appeal passed by Commissioner (Appeals) regarding Modvat credit on inputs and duty drawback.
2. Imposition of penalty and interest under Section 11AC and Section 11AB.
3. Interpretation of provisions under Modvat scheme for reversal of credit.

Analysis:

1. The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner (Appeals) in a case involving the availing of Modvat credit on inputs by a company engaged in manufacturing HDPE bags, sacks, fabrics, etc., and claiming duty drawback. A Show Cause Notice was issued to demand the reversal of Modvat credit on total inputs used in the manufacture of finished goods for which drawback was claimed.

2. The original adjudicating authority confirmed the demand and imposed penalties under Section 11AC, along with ordering interest recovery under Section 11AB. The Respondents contested this decision before the Commissioner (A), who set aside the penalties and interest, citing the absence of specific provisions in the Modvat scheme for credit reversal under Central Excise Law for duty drawback purposes.

3. The advocate representing the Respondents emphasized that, despite the lack of explicit Modvat provisions for credit reversal, the company voluntarily reversed the credit upon realizing their liability, paying the duty well before the Show Cause Notice was issued. Referring to a Tribunal's previous ruling and a case involving duty payment before the Notice, it was argued that no penalty or interest could be imposed under Section 11AC or Section 11AB in such circumstances.

4. The Revenue's representative argued that the case-law cited by the Respondents pertained to duty payment rather than Modvat credit.

5. After examining the case records and arguments from both sides, the Tribunal acknowledged the absence of provisions for credit reversal under Central Excise Law to enable duty drawback claims. Recognizing the Respondent's proactive cooperation in reversing the credit pre-Show Cause Notice, the Tribunal upheld the Commissioner (A)'s decision and rejected the Revenue's appeal in its entirety, aligning with the judicial principles and precedents referenced during the proceedings.