2006 (11) TMI 66 - AT - Central Excise

Tribunal allows correction of Modvat credit account, overturns Commissioner's decision

The Tribunal held that the dropping of the demand for Rs. 11 lakhs meant that the debit entries made by the appellants were not necessary. Therefore, the ... Cenvat/Moodvat – Appellant were engage in the job of galvanization and he reversing the credit of duty availed in respect of zinc which is used in galvanization - demand for reversal of credit dropped by the Commissioner, so no debit enteries made by the appellant in modvat credit account Issues:1. Reversal of Modvat credit for duty availed in galvanization2. Dispute regarding the reversal amount and show cause notice3. Entitlement to reverse debit entry after dropping of demand4. Appeal against order allowing restoration of Modvat creditAnalysis:1. The appellants were engaged in galvanization of duty paid steel sections on a job work basis, where the final product was removed without payment of duty. They were reversing the Modvat credit of duty availed for zinc used in galvanization as per Rule 57CC. An amount of Rs. 4,32,807 was reversed by them during a specific period.2. A dispute arose regarding the reversal amount, leading to a show cause notice for a higher sum of Rs. 11,71,132, which included the previously reversed amount. The Commissioner dropped the show cause notice on 4-2-1997.3. Following the dropping of the demand, the appellants sought to reverse the debit entry already made by them. The Revenue objected to this, but the Assistant Commissioner allowed the restoration of Modvat credit to the tune of Rs. 4,32,807 to their account. The Revenue appealed against this decision, contending that a refund application should have been filed as per Section 11B.4. The Tribunal, after considering the arguments from both sides, concluded that the dropping of the demand for Rs. 11 lakhs meant that the debit entries made by the appellants were not necessary. Therefore, the appellants were entitled to correct their Modvat credit account. The Tribunal found the Assistant Commissioner's order appropriate and in accordance with the law, setting aside the Commissioner (Appeals) decision and allowing the appeal with consequential relief to the appellants.