2005 (11) TMI 288 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat Credit on dyeing plant under Notification No. 4/97.
2. Denial of Capital goods Credit under Rule 57Q.
3. Allegation of non-entitlement of benefit of Exemption Notification No. 4/97.
4. Reduction of penalty by Commissioner (Appeals).
5. Applicability of amending Notification No. 34/97 dated 6-6-97.

1. Availment of Modvat Credit on dyeing plant under Notification No. 4/97:
The appellants availed Modvat Credit on a dyeing plant on 30-5-97 but subsequently filed a declaration for the concessional rate under Notification No. 4/97. A show cause notice was issued due to the condition in Notification No. 34/97, which does not allow credit under Rule 57A or 57Q. The Deputy Commissioner demanded the amount under Rule 57U, imposed penalties under Rules 173Q, and demanded interest under Section 11AA.

2. Denial of Capital goods Credit under Rule 57Q:
The argument was made that denial of Capital goods Credit cannot be based on the alleged non-entitlement of the benefit of Exemption Notification No. 4/97. The appellants contended that the Capital goods Credit was availed before the amending Notification No. 34/97, and there was no restriction in Rule 57Q for denial of credit. The department was criticized for questioning the Modvat Credit availed by the appellants, which was taken before the amendment of the notification.

3. Allegation of non-entitlement of benefit of Exemption Notification No. 4/97:
The department reiterated that the appellants were not entitled to the exemption under Notification No. 4/97 as amended. However, the tribunal found that the appellants had availed the Capital goods Modvat Credit before the amendment of the notification, and thus, were not at fault for availing it. The subsequent amendment preventing the availing of the exemption if Modvat Credit was taken gave rise to the issue.

4. Reduction of penalty by Commissioner (Appeals):
The Commissioner (Appeals) had initially reduced the quantum of penalty imposed on the appellants. Still dissatisfied, the appellants approached the Tribunal seeking further relief.

5. Applicability of amending Notification No. 34/97 dated 6-6-97:
The Tribunal, after examining the case record and arguments from both sides, found merit in the appellants' contentions. It was noted that the appellants had availed the Credit before the amendment of Notification No. 4/97 and were currently paying for clearances from PLA. The Tribunal set aside the impugned order and that of the adjudicating authority, providing consequential relief to the appellants.

This detailed analysis of the judgment highlights the issues surrounding the availment of Modvat Credit, denial of Capital goods Credit, allegations of non-entitlement of exemption, reduction of penalty by the Commissioner (Appeals), and the impact of the amending Notification No. 34/97.