The Customs, Excise And Service Tax Appellate Tribunal, Chandigarh ruled that the excise duty demand on annual production capacity basis of unit fixed by competent authority is not sustainable.
The bench noted that during the month of August, 1997, the Modvat Credit was available with the appellant and has only lapsed w.e.f. 01.09.1997 when the Notification No. 43/97 was made applicable.
Therefore, the tribunal viewed that Modavt credit has rightly been availed by the appellant.
The bench found that earlier the Commissioner vide his order finally determined the annual capacity of production of the appellant that the appellant was paying duty @ Rs.400/- per MT. It clearly shows that they were working under Rule 96 ZP(1) instead of 96 ZP(3) of the Rules.
It was further found that the appellant has been regularly filing the returns showing that they are working under Rule 96 ZP(1) and therefore, are entitled to the abatements during the period of closure of the factory.
The bench stated that the appellant have also made declaration under Rule 173B stating that w.e.f. 01.09.1997, they will operate under Rule 96 ZP(1) instead of Rule 96 ZP(3). The demand of duty on the basis of annual capacity of production of the unit fixed by the competent authority is not sustainable in view of the fact that the order of the Commissioner fixing the annual capacity of production was set aside by the Tribunal vide order, further the department filed the appeal before the High Court and the High Court dismissed the appeal of the department and subsequently, the Supreme Court also dismissed SLP filed by the department.
Facts
The appellant were engaged in the manufacture of non-alloy bars and rods falling under chapter heading 7211.11 and 7214.90 of the First Schedule to the Central Excise Tariff Act, 1985.
During scrutiny of returns of the appellant, it was observed that they had utilized the Modvat Credit amounting to Rs.1,24,027.67 during the month of August, 1997 for payment of central excise duty on the final products.
Since the credit available with the appellant lying on 31.07.1997 had already lapsed as per Notification No. 33/97-CE (NT), no fresh credit could be allowed to the appellant, they were required to pay central excise duty from PLA on the clearances effected during August, 1997.
Thus, an amount of Rs.1,24,027 67 was recoverable from the appellant. It was further observed that as the appellant had opted to pay duty under Section 3A of the Central Excise Act, 1994 as per their option under sub-Rule (i) of Rule 96ZP, their annual capacity was fixed by the Commissioner of Central Excise, Chandigarh-II vide letter dated 21.11.97 as 3755.530 MTs (provisionally) under Rule 3(4) of Hot Re-Rolling Mills Annual Capacity Determination Rules, 1997.
As such, the appellant were required to pay central excise duty of Rs.1,25,184/- per month w.e.f. 01.09.1997.
During the period September, 1997 to March, 1998, the appellant did not pay central excise duty as determined by the Commissioner, Central Excise, Chandigarh which resulted in short paid central excise duty to the tune of Rs.5,10,756/-.
Accordingly, the show cause notice was issued to the appellant. The adjudicating authority vide its order confirmed the demand of central excise duty along with interest @ 18% per annum and imposed penalty of Rs.6,34,784/ on the appellant under Rule 173Q of the Central Excise Rules, 1994.
Aggrieved by the said order, the appellant filed appeal before the Commissioner (Appeals) who vide the impugned order has rejected the appeal of the appellant and upheld the Order-in-Original.
Conclusion
The bench opined that the appellant have fully discharged payment of duty in accordance with Section 3A, Rule 96 ZP(1) & (2) and the order is not sustainable in law.
Case Details
Case Name: M/s Osaka Alloy & Steel (P) Ltd v/s Commissioner of Central Excise, Ludhiana
Citation: Excise Appeal No. 2355 of 2011
Counsel for Petitioner : Sh. Om Prakash, Appellant in person
Counsel for Respondent : Sh. Rakesh Agarwal (Special Counsel)
Court: CESTAT, Chandigarh
Judge: Sh. S. S. GARG, MEMBER (JUDICIAL) and Sh. P. ANJANI KUMAR, MEMBER (TECHNICAL)
Decision Date: 09/08/2024