ORDER
M.V. Ravindran, J.
1. This appeal is directed against the Order-in-Appeal dated 24.9.2003 wherein it was held that the appellants are liable to pay duty on the inputs lying in stock as on 1.8.1997.
2. The relevant facts that arise for consideration are that the appellants are manufacturers of M.S. Ingots and Billets falling under Chapter 72. The appellants were availing Modvat benefit. From 1.8.97 the appellants’ products got covered under Section 3A of the Central Excise Act which was further compounded levy scheme on the goods manufactured by the appellants. The Central Government by notification No. 33/97 dated 1.8.97 amended Rule 57F(17) of the Central Excise Rules, 1944 which disallowed the Modvat Credit allowing unutilized inputs as on date i.e. 1.8.97. The appellants were issued show cause notice asking them to show cause as to why an amount of Rs. 6,46,771/- be not demanded from them for the inputs lying in stock in finished goods and W.I.P. The appellants contested the show cause notice. The adjudicating authority vide his Order-in-Original dated 19.11.99 confirmed the demand and also imposed equivalent amount of penalty. On an appeal the appellate authority upheld the Order-in-Original to the extent of duty demand but reduced the penalty to Rs. 10,000/-. Hence, this appeal.
3. Heard both sides, considered the submissions and perused the records. I find that show cause notice has been issued on a ground which is not correct in law. The relevant portion of the show cause notice is found in para 3 which is reproduced below:
From the perusal of the records of the assessee it appears that on 01/08/97 the Modvat Credit balance as per their RG23-A Part-II was Rs. 257.07 while Modvat credit involved with input in stock, and contained in final product stock which is much higher than Modvat Credit in balance. The unutilized Modvat Credit which the Notification referred includes Modvat Credit involved with input in stock, and consumed in finished stock. However in other related cases of similar nature and provisions prevalent therein, it is mandatory to have to lapse that much amount of modvat credit in balance as is lying which covered input in stock or contained in finished goods.
I find that that the show cause notice has tried to read words in the notification which amended Rule 57F(17). The said reading of the notification would be totally contrary of the scheme of Modvat. Notification No. 33/97-CE(NT) dated 1.8.99 inserted Clause (c) & (d) in the said rule. The said notification did not say anything other than insertion of these clauses in Rule 57F(17). Rule 57F(17) during the relevant period stood as follows:
Notwithstanding anything contained in Sub-rule (12) or Rule 57A, any credit of specified duty lying unutilized.
From the above it is very clear that the credit which is sought to be reversed by notification No. 33/97-CE was only that amount of credit which is lying unutilized in the books of account of the appellants. The said notification does not authorize the department to demand duty on the inputs which are lying in finished goods and W.I.P.
4. I find that the case law, relied upon by the learned Consultant, in the case of Kakda Rolling Mills v. CCE, Bhopal have clearly held that Cenvat/Modvat credit facility in respect of goods manufactured by appellant withdrawn vide Notification No. 18/97-C.E. with effect from 1.8.97 – “Compounded levy scheme opted for, by appellant, for payment of duty under erstwhile Section 3A of Central Excise Act, 1944 – Balance credit in respect of inputs lying unutilised on 1.8.1997 having stood lapsed in terms of Rule 57F(17))(c) of erstwhile Central Excise Rules, 1944, no further duty to be demanded in respect of inputs lying in stock – Section 11A of Central Excise Act, 1944.” Again the Tribunal in the case of CCE, JSR. v. Ravi Hi-Tech 2004 (175) ELT 624 (Tri.-Kolkata) had an identical issue before it wherein it is held that Cenvat/Modvat – Input and final product denotified from purview of Rule 57A of erstwhile Central Excise Rules, 1944 with effect from 1.8.1997 – Credit availed and utilized on inputs lying in stock and inputs contained in finished goods lying in stock on 1.8.1997 not to be reversed. From the above two Division Bench decision of the Tribunal it is very clear that the amount of Credit which is lying unutilised in the books of account i.e. RG23 Part II only lapses there is no provision to demand the duty or seek reversal of the duty lying in stock or finished goods in W.I.P.
5. In view of the above findings the impugned Order of the Commissioner (Appeals) deserves to be set aside. Accordingly I set aside the impugned Order and allow the appeal.
(Dictated and pronounced in the Open Court.)