ORDER
V.K. Ashtana, Member (T)
1. This is an appeal by revenue against Order-in-Appeal No. 347/96, dated 27-5-1996, wherein, the Order-in-Orginal has been modified as follows.
2. Basically the issue concerns the Order-in-Original confirming a demand of Rs. 1,85,624/- by denying Modvat credit on certain goods viz., Simplex Fly Frames and Draw Frames, credit on which was taken during the period from 4-6-1994 to 29-7-1994 on the grounds that such machinery was used for the production of cotton combed or carded falling under Heading 5202 of the Central Excise Tariff Act, 1985. The reason given for denial of credit was that in the relevant notification specifying the final products to which the capital goods Modvat scheme was applicable did not provide for eligibility for any final goods falling under 5202. However the said notification was amended by Notification No. 60/94-C.E.(N.T.), dated 21-10-1994, whereby the Headings 5201 and 5202 were omitted from the negative list thereunder, the effect being that such equipments which were used to produce goods falling under 5202 was also brought within the scope of Rule 57Q. There is nothing in the said notification which provides for a retrospective effect. The present respondents were aggrieved by the Order-in-Original which held this decision and, therefore, in consideration of their appeal, the learned Commissioner (Appeals) held that in view of the practice followed by him earlier, proportionate credit upto 21-10-1994 at the rate of 2l/2% per quarter should be disallowed and the balance of the credit in question should be restored in view of the provisions of Rule 57-S ibid.
3. Heard learned JDR, Shri Sankaravadivelu, who reiterated the grounds of appeal and said that since the aforesaid notification made goods under Heading 5202 eligible in terms of Rule 57Q only w.e.f. 21-10-1994, therefore, the question of allowing credit at any percentage taken prior to this date would just not arise because during that period the said final product was not covered by Rule 57Q at all. Therefore, the question of taking credit taken at the rate of 2.5% per quarter etc., were not corect in law. He further submitted that Rule 575 deals with the manner of utilisation of the capital goods but does not by itself allow of taking Modvat credit as that is spelt out only under Rule 57Q.
3. Heard learned Advocate Shri J. Shankar Raman, who cited this Tribunal’s Final Order No. 1705 to 1706/98 dated 27-8-1998 in the case of M/s Kandagiri Spinning Mills Ltd. wherein, it was held that such credit could not be available prior to 21-10-1994 in view of the decision in the case of Sungunthar Spinning Mills as reported in 1998 (99) E.L.T. 409 (Tribunal). However, on the analogy of Board’s Circular No. 185/19/96-CX, dated 19-3-1996, wherein, an EOU is getting Modvat credit after debonding of goods, the matter was remanded to the original authority for reconsideration.
4. I have carefully considered arguments on both sides. It is now settled law that there is no room for intentment in any notification, therefore, Notification No. 60/94 has to be considered on a plain reading thereof. Such a consideration brings us to the conclusion that prior to 21-10-1994 the credit was not available under Rule 57Q. To this extent the impugned Or-der-in-Appeal appears to suffer from infirmity, particularly because it has not been clarified therein as to on what basis the percentage of 2.5% has been arrived at and under which law. I, therefore find that the impugned Order-in-Appeal is liable to set aside on the count. Ordered accordingly.
5. The Order-in-Original which is, now restored in view of the aforesaid order setting aside the Order-in-Appeal, has imposed a penalty of Rs. 20,000/- on the present respondents for wrongly taking Modvat credit. I find that when the credit was taken, there was bona fide dispute on the issue and this dispute even included the question of whether combed carded sliver was excisable under the Central Excise Tariff or not. This issue was thereafter settled and it had been held by this Tribunal that it would fall as excisable goods under 5202. Taking all the facts and circumsatnces of the case, I find that in view of this confusing situation arising earlier, the respondents could have harboured a benefit of doubt and, therefore, a lenient view is warranted as far as penal action is concerned.
6. In view of these findings, I order that the penalty of Rs. 20,000/- is reduced to Rs. 2,000/-. Ordered accordingly.
7. The Revenue appeal is disposed of in the above terms.