2002 (5) TMI 795 - AT - Central Excise

Appellate Tribunal Grants Relief, Validates Demand Notice

The Appellate Tribunal allowed the appeals, setting aside the orders of lower authorities. The Tribunal upheld the validity of the demand notice within ... Modvat/Cenvat - Modvat on input - Demand - Penalty - Account records - Order Issues:1. Validity of demand notice and time bar for issuing show cause notice.2. Eligibility of credit on inputs like paper tubes and conning oil.3. Correctness of maintaining accounting records and debit entry.4. Jurisdiction of authorities beyond the show cause notice.Analysis:Issue 1: Validity of demand notice and time bar for issuing show cause noticeThe Appellants contended that the demand notice alleging fraud exceeded the jurisdiction of the Superintendent of Central Excise and was not maintainable. However, the Commissioner (Appeals) found the demand notice issued within the six-month period from the last date of filling of the return, thus not barred by limitation. The penalty imposed was upheld as proper.Issue 2: Eligibility of credit on inputs like paper tubes and conning oilThe Appellants argued that they were entitled to credit as their final product fell under Rule 57A. They disputed the denial of credit on inputs like paper tubes and conning oil. The Appellate Tribunal found that these inputs were essential for manufacturing Polyester Texturised Yarn (PTY) and were eligible for credit. The Tribunal rejected the contention that the packing material and conning oil were ineligible, emphasizing their necessity in the manufacturing process.Issue 3: Correctness of maintaining accounting records and debit entryThe Tribunal highlighted that the debit entry made without written demands from the Audit party was impermissible under the law. It emphasized the importance of correct maintenance of accounting records and the necessity for supporting demands or invoices for debits in the RG 23A register. The Tribunal noted that corrections should be made as per Rule 226, and penalties under the rule should be imposed for incorrect entries.Issue 4: Jurisdiction of authorities beyond the show cause noticeThe Tribunal observed that both authorities had exceeded their jurisdiction by ruling beyond the scope of the show cause notice. It emphasized that the orders were flawed on this ground and should be set aside. The Tribunal concluded that as the credit was eligible and the impermissible debit entry needed reversal, the orders of the lower authorities were set aside, and the appeals were allowed with consequential relief.In conclusion, the Appellate Tribunal set aside the orders, allowing the appeals and providing consequential relief based on the eligibility of credit on essential inputs, the impermissibility of the debit entry without proper demands, and the jurisdictional limitations of the authorities beyond the show cause notice.