2002 (7) TMI 363 - AT - Central Excise

Tribunal overturns duty demand & penalty, remands Modvat/Cenvat credit for review

The Tribunal set aside the duty demand and penalty, allowing the appeal and remanding the matter of Modvat/Cenvat credit for reconsideration. The decision ... Exemption Issues:1. Exemption under Notf. No. 67/95-C.E., dt. 16-3-95 for PET bottles used as packaging material.2. Availment of Modvat/Cenvat credit on raw materials for PET bottles.3. Imposition of penalty under Central Excise Rules, 1944.Exemption under Notf. No. 67/95-C.E., dt. 16-3-95 for PET bottles used as packaging material:The appellants claimed exemption under Notf. No. 67/95-C.E., dt. 16-3-95 for PET bottles used in packaging aerated waters, contending that the PET bottles were captively consumed as packing material for the final product. The issue arose when the Deputy Commissioner alleged that the conditions for exemption were not met as certain PET bottles used for packing final products did not have Central Excise duty paid on them. The Commissioner confirmed the duty demand, stating that the exemption was available only when goods were assessed under Section 4, not Section 4A. However, the Tribunal held that the exclusion clause in the notification concerning packaging materials applied to products assessed under Section 4, not Section 4A. The subsequent amendment to the notification further supported the appellants' contention, leading to the demand and penalty being set aside.Availment of Modvat/Cenvat credit on raw materials for PET bottles:The appellants were accused of wrongly availing Modvat/Cenvat credit on raw materials used in manufacturing PET bottles that were cleared without duty payment. The Commissioner confirmed the duty demand but dropped the demand for Modvat/Cenvat credit, stating that once PET bottles were dutiable, the credit could not be denied. However, as the duty demand on PET bottles was set aside by the Tribunal, the findings on Modvat/Cenvat credit were subject to reconsideration, requiring a fresh order from the adjudicating authority.Imposition of penalty under Central Excise Rules, 1944:A penalty of Rs. 5 lakhs was imposed on the appellants by the Commissioner under Rule 173Q of Central Excise Rules, 1944. However, the Tribunal set aside the duty demand and penalty, allowing the appeal. The matter regarding the dropped demand of Rs. 11,851.00 as Modvat/Cenvat credit on raw materials was remanded for reconsideration by the adjudicating authority, ensuring the appellants are given a fair hearing before a final decision is made.In conclusion, the Tribunal set aside the duty demand, penalty, and allowed the appeal, remanding the matter of Modvat/Cenvat credit for reconsideration. The decision was based on the misapplication of the exemption clause, subsequent notification amendment, and the need for a fresh assessment of the Modvat/Cenvat credit issue.