1999 (9) TMI 308 - AT - Central Excise

Tribunal allows duty-free inputs in final products, citing Ministry circular and Supreme Court judgments.

The Tribunal waived the deposit of duty and penalty for utilizing duty-free inputs in the manufacture of final products cleared for home consumption. ... Stay/Dispensation of pre-deposit - DEEC Scheme Issues:Waiver of deposit of duty and penalty for utilizing duty-free inputs in the manufacture of final products cleared for home consumption.Analysis:The case involved an application for the waiver of deposit of duty amounting to Rs. 4.67 crores and a penalty of Rs. 50 lakhs. The applicant had used inputs received under a Customs exemption notification related to the DEEC scheme without paying the basic and additional duty of customs. The Commissioner's order contended that such a procedure was impermissible under the law. The appellant argued that a Ministry circular permitted this procedure, citing judgments from the Supreme Court and the Tribunal supporting their stance. The legal undertaking executed during import under DEEC showed that the inputs had been used in the manufacture of goods exported, not those cleared for home consumption.The Departmental Representative supported the Commissioner's reasoning that non-duty paid material could not be considered inputs as per Rule 57A, despite the appellant's reliance on the circular. The Tribunal found it challenging to accept the argument that duty-free inputs used in manufacturing exported goods could not be considered non-duty paid when used in goods cleared for home consumption. The appellant had used both non-duty paid and duty paid material in manufacturing the final product, paying duty partly from the credit on duty paid inputs and partly from the personal ledger account balance.The Tribunal noted that in the Modvat scheme, there was no direct correlation between input and finished product, allowing flexibility in utilizing credit for duty payment. They emphasized the importance of the circular in interpreting rules and contemporary exposition, citing the Supreme Court's stance on adhering to Tariff advice or Trade notices. Even if the department's demand for duty was partially valid, the duty amount confirmed was excessive. Therefore, the Tribunal waived the deposit of duty and penalty, staying their recovery in the circumstances of the case.