ORDER
T.K. Jayaraman, Member (T)
1. This appeal has been filed against Order-in-Appeal No. 83/2004 dated 28.7.2004 passed by the Commissioner of Central Excise (Appeals-II), Bangalore. Revenue proceeded against the appellants on the ground that they had availed the benefit of Notification No. 6/2002 and 6/2003 by violating its condition. The condition stipulates that the benefit of Notification would be available only when no credit of duty is taken on inputs. Further, the appellants took the credit and also availed the benefit of the Notification. Therefore, the lower authority adjudicated the case and demanded duty of Rs. 3,51,569/- under Section 11A of Central Excise Act 1944. Further, he imposed penalty of Rs. 1 lakh under Rule 25 of CE Rules 2002. The appellants approached the Commissioner (A). The Commissioner (A) gave a finding that demand of duty, interest and penalty by the adjudicating authority is fully justified, hence, he upheld the impugned Order-in-Original. The appellants strongly challenge the impugned Order-in-Appeal. Hence, they have come before this Tribunal for relief.
2. S/Shri S. Raghu and Varadarajan, Advocates appeared on behalf of the appellants and Shri Ganesh Havanur, SDR for the Revenue.
3. The learned Advocates made the following submissions.
(i) The Commissioner (A) failed to appreciate that the show cause notice itself states in Annexure “Aluminium circles manufactured out of non-modvat raw materials” which itself proves that the appellants are rightfully entitled to the benefit of the Notification 6/2002 and 6/2003, since no credit was availed on the raw materials used in the manufacture of final products. This aspect has not at all been considered by the adjudicating authority.
(ii) The Commissioner (A) has passed the order holding that details of break-up of quantity of furnace oil used in the manufacture of goods cleared under the concessional rate of duty and tariff rate had not been given. The lower authority did not call for such details. The Commissioner ought to have provided an opportunity to the appellants to submit whatever details are required. Passing an order sue motto is highly illegal and unjust.
(iii) The appellants had two furnaces, one is oil burnt and the other coke burnt. The manufacture of final product out of non-modvat raw materials was carried out using the coke burnt furnace and as such the question of availing modvat credit on furnace oil has no relevance. The appellant also paid duty accordingly Rs. 2,500/- per MT. These submissions have not been discussed at all.
(iv) The appellants had not violated any of the provisions of the Notifications. They had availed credit on furnace oil only and used them for melting slugs and scrap of high purity aluminium, which were cleared on payment of duty at tariff rate.
(v) The adjudicating authority on his own has concluded that furnace oil being used in the manufacture of circles cleared under concessional rate of duty, based on the submissions that the appellant were availing duty on furnace oil on every alternate bill on the input. This cannot be a basis to conclude that circles were produced utilizing furnace oil on which credit was taken and hence, the unilateral conclusion is not sustainable.
(vi) No duty can be demanded on 25818 kgs of circles cleared by way of job work using coke furnace. This has not been accepted by the lower authority. He has assumed that oil burnt furnace was also used in the manufacture of circles without letting in any evidence.
(vii) The Commissioner (A) has solely proceeded based on an earlier order of the Additional Commissioner for the preceding period and has been influenced by the same.
(viii) Even assuming that furnace oil was used in the manufacture of the said circles, it is submitted that once the credit taken is reversed, the benefit of exemption cannot be denied. They relied on the Apex Court’s decision rendered in the case of Chandrapur Magnets .
(ix) Once the appellants are entitled to the benefits of Notifications 6/2002 and 6/2003, the question of demand for differential duty, penalty and interest is not sustainable. It is also well settled that when duty/credit has been reversed before the issue of show cause notice voluntarily, no penalty or interest is demandable.
(x) There was no intention to evade duty and as such no penalty is imposable.
(xi) Even assuming that the appellants are not entitled for exemption Notification and differential duty, the appellant is entitled to the benefit of cum duty price as per Apex Court’s decision rendered in the case of Maruti Udyog Ltd. 2002 (49) RLT 1.
(xii) No duty was payable in respect of 25818 kg of Aluminium circles manufactured under job work, hence the duty inadvertently paid amounting to Rs. 31,438/- was liable to be refunded. This point has not been considered on the ground that since the appellants have themselves discharged the duty, the claim is not sustainable.
4. The learned SDR reiterated the Commissioner’s view.
5. We have gone through the facts of the case carefully. The appellants have stated that out of the two furnaces, one is based on furnace oil and the other is coke based. In respect of the coke based furnace, there is no question of availing any modvat on furnace oil. They have also stated that they have not cleared the goods manufactured out of the coke based furnace on concessional rate of duty. In any case, the appellants have reversed an amount of Rs. 1,91,509/- towards the modvat availed on furnace oil relating to the clearances made on concessional rate of duty. This has been acknowledged in the Order-in-Original itself. Therefore, according to the appellant, out of the total demand of differential duty amounting to Rs. 3,51,569/-, what is due to the revenue is only Rs. 1,91,500/-, because this is the amount on which they had availed modvat credit. Hence, there is no question of payment of the remaining amount of Rs. 1,60,060/-, since the modvat credit availed on furnace oil relating to clearances of goods at concessional rate of duty has already been reversed. They made a strong plea of non-imposition of penalty in view of the Apex Court’s decision in the case of Chandrapur Magnet’s case (supra). Since the appellant had already reversed the modvat credit availed on furnace oil, we set aside the demand of Rs. 1,60,060/- and also the penalty imposed. The appeal is allowed in the above terms.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)