CCE Vs. T. SRINIVAS AND CO.

JUDGEMENT

(1.) This is an appeal filed by the Revenue against the Order -in -Appeal No. 118/02 (H -III) CE dtd. 31.10.2002 passed by the Commissioner of Central Excise (Appeals), Hyderabad.

(2.) M/s. T. Srinivas and Co., Hyderabad are manufacturer of packaged Tea in various packings falling under sub -heading 0902.10 of Central Excise Tariff Act, 1985. They were availing modvat credit on inputs/packing materials used in the manufacture of the final product package tea. With effect from 18.7.98, packaged tea in packings up to 100 grams were exempt from payment of duty under Notfn. No. 17/98 dtd. 18.7.1998. The respondents had a balance stock of packaged tea in packings up to 100 grams on this date and they were also having various inputs on which they were taking modvat credit, they were asked to reverse the credit taken on the inputs used in the manufacture of such packaged tea as Rule 57(i) of Central Excise Rule, 1944 does not allow modvat credit on inputs used in manufacture of final products which are exempt from payment of duty or chargeable to nil rate of duty. Show Cause Notice was issued to them and the Assistant Commissioner confirmed the demand of Rs. 3,54,433/ - under Rule 571 of Central Excise Rules, 1944 and imposed a penalty of Rs. 30,000/ -. However, the Commissioner (Appeals) allowed the appeal of the respondents under the impugned order.

(3.) Shri Narasimha Murthy, Ld. JDR appeared for the Department and Shri B. V. Kumar, Ld. Advocate appeared for the respondents.