Per Shri P.C. Jain :

Following are the relevant facts :-

1. The appellant, a Govt. of India Undertaking, is having two units - one at Damanjodi and another at Angul. In Damanjodi unit, it manufactures Calcined Alumina falling under Chapter 28 of the Schedule to the Central Excise Tariff Act, 1985, out of duty paid inputs on which modvat credit has been taken and at Angul unit it manufactures Aluminium metal falling under Chapter 76 ibid out of calcined alumina manufactured at, and dispatched from, Damanjodi.

2. During the material period 20.4.1989 to 24.7.1989, the appellant dispatched calcined alumina without payment of duty following the Chapter X procedure of the Central Excise Rules, 1944 in terms of Notification No. 217/86 dated 3.4.86 ( as amended). Modvat credit of duty paid on inputs for manufacture of Alumina (which in turn was utilised in manufacture of aluminium metal cleared on payment of duty) was not debited. Instead, the modvat credit earned at Damanjodi was utilised towards payment of duty on aluminium metal manufactured at Angul. Literally speaking, this meant transfer of modvat credit from Damanjodi unit to Angul unit.

3. By a notice dated 18.9.89, the appellant