2002 (2) TMI 1145 - AT - Central Excise

Summary

Issues:
Appeal against denial of Modvat credit and imposition of penalty - Eligibility of items as capital goods under Rule 57Q - Waiver of pre-deposit and stay of recovery.

Analysis:
The appeal before the Appellate Tribunal CEGAT, New Delhi involved challenging the denial of Modvat credit and imposition of a penalty by the Commissioner of Central Excise. The appellants sought credit totaling Rs. 5,34,372/- on various goods treated as capital goods under Rule 57Q from May 1994 to July 1997. The primary issue was the eligibility of these items as capital goods and the imposition of a penalty of Rs. 50,000/-.

The Counsel for the appellants argued that the items, including a Truck Loading Machine, Transformer, spares of Material Handling Equipments, Tyres, and structural support to ESP hopper, qualified as capital goods under Rule 57Q during the material period. The Truck Loading Machine was used for loading cement bags onto trucks, the Transformer for manufacturing process voltage regulation, and the other items for handling raw materials within the factory premises. The Counsel contended that all these items met the definition of capital goods under Rule 57Q, thus challenging the Commissioner's decision.

The Departmental Representative (DR) opposed the application, arguing that the Truck Loading Machine was not used in the cement manufacturing process but for loading final products after the RG-1 stage. The DR also highlighted that the Modvat credit on Tyres was taken without proper declaration under Rule 57T, which was a ground for denial. The Tribunal found that the Truck Loading Machine was prima facie eligible for capital goods credit as a material handling equipment used in manufacturing. However, the credit on Tyres was correctly denied due to non-declaration under Rule 57T, following the precedent set by the Tribunal's Larger Bench decision in the case of Avis Electronics.

As a result, the Tribunal directed the appellants to deposit Rs. 2 lakhs under Section 35F and report compliance by a specified date. Upon compliance, there would be a waiver of pre-deposit and stay of recovery for the remaining duty amount and penalty. The judgment balanced the arguments presented by both sides and applied legal principles to determine the eligibility of items for Modvat credit under the relevant rules.

This detailed analysis of the judgment showcases the legal reasoning behind the decision to uphold the denial of credit on Tyres while allowing credit for other items, emphasizing compliance with declaration requirements and legal precedents in tax matters.