C.N.B Nair, Member (T)

1. The duty demands have arisen on account of two factors :-

(a) The appellant took Modvat credit on common inputs i.e. inputs which are common for exempt and dutiable pens but did not keep separate accounts or pay 8% on the exempted pens or reverse the credit.

(b) The appellant gave certain special discounts and brought the value of certain pens within the exempted limit.

2. We have perused the records and heard both sides. With regard to the common inputs, the submission of the appellant is that the total amount of Modvat credit was only Rs. 5 lakhs and even though a part of it was used in the manufacture of dutiable goods/ they have already reversed the entire credit of Rs. 5 lakhs to give a quietus to the dispute. During the hearing of the case, learned Counsel for the appellant has submitted that such reversal of credit meets the requirement of law. Reference in particular was made to Order No. C-II/792/WZB/2002, dated 25-2-2002 of the West Regional Bench of this Tribunal in the case of CCE, Ahmedabad v. Nirma Ltd. and the decision of the Tribunal in the case of Pushpaman Forgings v. CCE, Mumbai-VII - [2002 (149) E.L.T. 490 (Tri. - Mum.) = 2002 (48) RLT 107]. Learned Counsel has also pointed out that the decision of the Tribunal in the case of Pushpaman Forgings has been confirmed by the Apex Court as reported in [2003 (153) E.L.T. A89 (S.C.)].

3. Learned SDR has pointed out that since no reversal of credit was done prior to the clearance of pens in question, the facility of reversal of credit could not be available to the appellant.

4. We are not able to agree with this view of the learned SDR. The requirement in the Modvat rules is the reversal of credit taken in excess of what is due. The time of reversal is not material for this. The legal position on this issue remains settled by the decision of the Tribunal in the aforesaid cases. In these circumstances, we are not able to find any merit in respect of demand on account of taking Modvat credit on common inputs.

5. With regard to the duty demand on account of special discounts, the contention of the appellant is that these were sales under specific order and those orders were for prices below Rs. 100/- per pen, and that pens of value of less than Rs. 100/- remained exempt under Notification No. 4/97, dated 1-3-97. Learned Counsel for the appellant, therefore, submits that this demand is not legally or factually viable. As against this, the learned SDR took us to the finding in the impugned order that the appellant has brought sale price within the exempted value by giving special discounts and such a device should not be permitted.

6. We have seen sample cases involved in the dispute. One such supply is under Order dated 9th September, 1999 of Le Bouquet. This is an order for supply of 3,715 pens at a price of Rs. 99/- per piece inclusive of sales tax. There is no mention in the order of any discount. The price is an agreed one. Revenue has no case that the price of Rs. 99/- does not represent the full commercial consideration for the goods. The transaction is not in any way found to be tainted. Thus, there is no case to hold that value of the goods had been reduced through special discounts with the intention to bring it below the exempted level of Rs. 100/- per pen.Value of Rs. 100/- per mention has been defined in the notification as Section 4 value or Tariff value. Both these values exclude sales tax. So value of Rs. 99/- inclusive of S.T is clearly below the exempted value of Rs. 100/-. In these circumstances, we are not able to find any merit in the demand on this count also.

7. Under the impugned order, penalties have also been imposed on the appellant along with demand for interest. It is well settled that in the absence of short-levy of duty, there could be no penalty. Needless to say, when principal is not due, interest cannot be due. Penalty and interest also cannot survive.

8. In view of what is stated above, the appeal is allowed after setting aside the impugned order.