1998 (1) TMI 172 - AT - Central Excise

Summary

Issues:
Interpretation of Notification No. 217/86 regarding exemption of intermediate products; Reversal of Modvat credit without issuance of show cause notice.

Analysis:
In the first appeal, the main issue revolves around the interpretation of Notification No. 217/86 concerning the exemption of intermediate products in the manufacturing process. The appellants, engaged in the production of bi-metal bearings, argued that copper powder and bi-metal strips are intermediate stages in the creation of the final product and should be covered by the notification. The Central Board of Excise & Customs' clarification supported this stance by allowing credit on inputs for intermediate products listed in the notification. The Tribunal concurred, emphasizing that the final product is bi-metal bearings, making copper powder and bi-metal strips inputs eligible for the exemption under the notification. As a result, the impugned order in Appeal No. 2798/87-B1 was set aside, and the appeal was allowed.

Regarding the second appeal, the issue pertained to the absence of a show cause notice before the demand for reversal of Modvat credit was made through R.T. 12 returns. The appellant contended that as per the decision in the case of Kosan Metal Products Ltd., the issuance of a show cause notice is imperative before requiring credit reversal. The Tribunal agreed with this argument, citing the Apex Court's ruling, and consequently set aside the impugned order, allowing the appeal. The absence of a show cause notice rendered the demands and orders for credit reversal void ab initio, as emphasized by the legal precedent.

Therefore, the Tribunal's decisions in both appeals were in favor of the appellants, based on the correct interpretation of the law and established legal principles.