1999 (11) TMI 823 - AT - Central Excise

Summary

Issues Involved:
1. Disallowance of Modvat credit.
2. Imposition of penalty under Rule 173Q(1) of Central Excise Rules, 1944.

Detailed Analysis:

1. Disallowance of Modvat Credit:
The adjudicating authority disallowed Modvat credit amounting to Rs. 1,69,87,349.14 based on six grounds:
- Ground (i): The credit was availed on car components which appeared to be finished products themselves.
- Ground (ii): The credit was availed on photocopies of input documents.
- Ground (iii): The credit was availed based on cess which did not appear to be specified duty under Notification No. 5/94 (N.T.) dated 1-3-1994.
- Ground (iv): The credit was availed on the basis of documents where the inputs were not consigned to the factory premises.
- Ground (v): The credit was availed on tool kits which did not qualify as inputs under Rule 57A.
- Ground (vi): The credit was availed on goods sent for training and technical staff which were to be returned to the U.K.

Conceded Grounds:
The appellants conceded grounds (iii), (v), and (vi) and paid the amounts due to the government.

Ground (iv):
The dispute arose because the Bills of Entry and other documents showed the name of the company's office instead of the factory premises. The appellant argued that all import transactions were carried out by the office, but the manufacturing occurred at the factory, which was owned and controlled by the company. The tribunal found no substance in this ground, referencing the decision in *Larsen & Toubro Ltd. v. C.C.E.*, which supported the appellant's stance.

Ground (i):
The appellant cited a previous CEGAT Final Order, which stated that for customs classification, the goods should be deemed as 'cars' due to legal fiction but remained components for practical purposes. The Commissioner's refusal to follow this precedent was criticized as a violation of judicial discipline. The tribunal emphasized that subordinate authorities must follow higher authority decisions unless distinguished on facts or stayed/reversed by a higher authority.

Ground (ii):
The appellant initially availed Modvat credit on photocopies of triplicate Bills of Entry but later submitted the originals to the concerned official in November 1995. The tribunal found that the Commissioner's inability to verify these documents was not acceptable. The tribunal verified the originals and photocopies of the Bills of Entry, confirming their authenticity and defacement by the excise authorities. The tribunal concluded that the appellant's claim was valid and the Modvat credit was correctly availed.

2. Imposition of Penalty:
The adjudicating authority imposed a penalty of Rs. 1 Crore under Rule 173Q(1) of Central Excise Rules, 1944. Given the tribunal's findings that the Modvat credit disallowance was unsustainable, the penalty imposition was also set aside.

Conclusion:
The tribunal allowed the appeal, reversing the adjudicating authority's decision on disallowing Modvat credit and setting aside the imposition of the penalty. The appeal was allowed with consequential relief according to law.