2001 (10) TMI 223 - AT - Central Excise

Summary

Issues involved: The case involves the interpretation of Rules 57C and 57CC of the Modvat credit rules regarding the reversal of Modvat credit, applicability of Section 11A of the Central Excise Act, and the demand for payment under Rule 57CC.

Interpretation of Rules 57C and 57CC: The appellant, engaged in manufacturing forged steel products, availed credit of duty paid on inputs used in the manufacture of final products. The issue arose when certain goods sold to the Defence Department did not suffer duty, leading to a demand under Rules 57-I and 57CC. The appellant contended that they reversed the Modvat credit as per Rule 57CC, while the department argued for payment of 8% of the sale price. The Tribunal considered the appellant's submission and the circular indicating that the amount reversed is not Modvat credit or duty, ultimately setting aside the demand.

Applicability of Section 11A: The appellant argued that the amount demanded under Rule 57CC is not a duty, emphasizing that Section 11A of the Central Excise Act deals with the recovery of duty only. They relied on a circular stating that the amount sought is not Modvat credit. The Tribunal agreed that the amount sought was neither duty nor Modvat credit, and in the absence of a recovery mechanism under the Act and Rules, it cannot be claimed from the assessee.

Judicial Precedent and Liability: Referring to a judgment by the Madras High Court, the Tribunal highlighted the importance of machinery for enabling the collection of amounts from the assessee. The High Court's decision emphasized the need for proper authority to calculate and collect amounts due under Section 11D of the Act. The Tribunal declared that the liability created under Section 11D must be preserved and enforced in accordance with the law, granting liberty to determine and adjudicate the liability in line with the machinery provisions that may be enacted.

Conclusion: The Tribunal acknowledged the arguments presented by the appellant, emphasizing that the amount demanded was neither duty nor Modvat credit. Citing the need for proper machinery for recovery, the Tribunal set aside the demand under Rule 57CC. The case was disposed of with a declaration to preserve and enforce the liability under Section 11D in accordance with the law.