1991 (3) TMI 233 - AT - Central Excise

Tribunal grants relief to paints manufacturer in duty credit dispute

The Tribunal allowed the appeal in favor of the appellant, a paints manufacturer, in a dispute over the utilization of duty credit on inputs for payment ... Set-off of duty Issues:Appeal against Order-in-Orignal No. 1 (Demand) Collector/1987 regarding utilization of duty credit on inputs for payment of duty on final products under Central Excise Notification No. 201/79. Dispute over the utilization of credit on Melamine for paints and varnishes instead of M.F. Resin. Collector's decision on short-levy and extended period of limitation challenged.Analysis:The case involved an appeal against an order by the Collector of Central Excise, Ahmedabad, regarding the utilization of duty credit on inputs for payment of duty on final products under Central Excise Notification No. 201/79. The appellant, a paints manufacturer, utilized the duty credit on Melamine for paints and varnishes instead of M.F. Resin, leading to a dispute over short-levy. The Collector held that the credit was erroneously utilized, resulting in short-levy, and ordered payment of the amount. The appellant challenged this order, arguing that there was no short-payment as the duty was paid through debit in the Personal Ledger Account (PLA) and Proforma Credit Account. The appellant contended that the utilization of credit for paints and varnishes was permissible under the notification. The Collector invoked the extended period of limitation, which the appellant disputed.The Tribunal analyzed the declarations made by the appellant regarding the utilization of duty credit on inputs. The appellant had declared paints and varnishes in a letter dated 10-6-1981 and mentioned the use of Melamine for M.F. Resins in a subsequent letter. The Tribunal noted that while paints and varnishes were not explicitly specified in the second letter, the department should have sought clarification. The Tribunal found that the appellant's intention was to use the credit for M.F. Resins, and there was a technical error in credit utilization. The Tribunal emphasized the department's obligation to verify the proper utilization of input duty credit and found no suppression of material facts or willful misstatement by the appellant. The Tribunal held that there was no justification for invoking the extended period of limitation.In considering the merits of the dispute, the Tribunal referred to a relevant decision and noted that the benefit of the notification would be available even if intermediate products were involved in the manufacturing process. The Tribunal highlighted that Melamine was used in the manufacture of M.F. Resin, which, in turn, was used in paints and varnishes. Based on this analysis, the Tribunal held that the appellant's claim for the benefit of Notification No. 201/79 was well-founded. The impugned order was set aside, and the appeal was allowed in favor of the appellant with consequential relief.