2002 (5) TMI 698 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on capital goods used for exempted processes.

Analysis:
The appellants, engaged in the manufacture of cotton and man-made yarn, paid duty of excise on yarn at spindle point and availed Modvat credit on inputs under Rule 57A and capital goods under Rule 57Q. The issue arose when the scrutiny revealed that the appellants filed declarations for capital goods used for processes exempted from duty by notifications. A show cause notice was issued proposing denial of credit and imposition of penalty. The Commissioner confirmed the duty demand and penalty, leading to this appeal.

The contention of the appellants was that Rule 57R, which restricts credit if capital goods are used exclusively for exempted products, did not apply as the machines were used for both exempted and dutiable processes. However, the opposing argument highlighted that this plea was not raised before the Commissioner, making it belated for consideration at this stage. The appellants' claim that Modvat credit cannot be denied under Rule 57R(2) was also rejected by the Commissioner.

The Tribunal considered the submissions and found merit in the objection that the appellants did not raise the relevant plea before the Commissioner. As the plea was not brought up earlier and verification of the processes carried out by the machines was deemed necessary, the Tribunal upheld the Commissioner's decision, stating that interference with the order was unwarranted. Consequently, the appeal was rejected, affirming the denial of Modvat credit on capital goods used for exempted processes.