ESTER INDUSTRIES LIMITED Vs. CCE., MEERUT-II

JUDGEMENT

(1.) THE appellants M/s. Ester Industries Limited manufacture Polyester Chips, Polyester Films an Polyster yarn. they availed modvat credit on the inputs used in the manufacture of chips which are intermediate products in the further manufacture of the polyester films and Polyster Yarn. Polyster chips are also cleared outside the factory by availing complete exemption from the payment of duty under Notification No. 132/86 dated 1.3.86 and subsequent notification No. 53/88 dated 1.3.88. Further the end product viz. Polyester yarn was not specified under Notification No. 177/86 -CE dated 1.3.86 as one of the items in respect of which the benefit of the modvat credit could be available on the duty paid on the inputs.

(2.) THEY were issued a show cause notice dated 4.6.92 by the Additional Collector of Central Excise, Meerut in which apart from stating the above facts, it was also alleged that during the course of manufacture of polyster chips, polyster film and polyster yarn waste, rejects and scrap in considerable quantity was generated. The party had duly accounted for the waste/reject in their RG -1 register. A part of the waste/reject was found cleared free of duty by availing exemption under Notification No. 53/88 dated 1.3.88. It is alleged that as per the provisions of rule 57 -F(4), "Any waste arising from the processing of inputs in respect of which credit has been taken, may be removed on payment of duty as if such waste is manufactured in the factory. Such duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such inputs under rule 57A." It is stated that the said waste and scrap of plastic falling under heading NO. 3915.00 though excisable but was exempted from payment of duty under Notification No. 53/88 -CE dated 1.3.88 and polyster chips were also exempted from payment of duty under the same notification. It is stated that modvat credit under rule 57 -A is admissible on the inputs for polyster chips only to the extent the chips are used in the manufacture of polyster films. Under rule 57 -C input credit of duty is not allowed if final product is exempt. So modvat credit on the inputs of chips and rejects is not admissible to the factory except on the quantity of chips actually used in the manufacture of films. The party was reversing the incidence of input duty credit on polyster chips issued to yarn plant and sold as such. Similarly the incidence of input duty credit on waste and scrap of chips, film and yarn was also required to be paid back. It is alleged that the party had availed modvat credit on the exempted varieties of goods. It is further alleged that to evade the duty or reversal of modvat credit on the said goods, the party wilfully suppressed the facts in as much as in their reversal formula they did nt include the quantity of scrap generated to arrive at the incidence of modvat credit per Kg of chips as is evident from the calculation chart of modvat reversal during the period June 87 to June 88 submitted by the factory. It is further stated that the party did not account for disposal of 154546 Kgs. of polyster chips. Accordingly they were called upon to show cause why the Central Excise duty amounting to Rs. 1,08,489.40 by way of non -reversal of inadmissible credit of input duty in respect of 154546 Kgs. of chips on which input duty credit was availed, should not be demanded from them under Rule 57 -I read with the proviso to Section 11A of the Central Excise Act, 1944. They were further asked to show cause why a penalty should not be imposed on them under Rule 173 -Q.

(3.) THE party filed reply to the show cause notice and on consideration of the submissions made by the notice -party, the Additional Collector of Central Excise vide his order dated 15.12.97 confirmed the aforesaid amount of duty on the appellant apart from imposing al penalty of Rs. 50,000/ - on them.