2002 (10) TMI 434 - AT - Central Excise

Summary

Issues:
1. Wrong taking of Modvat credit on three counts.
2. Denial of credit and imposition of penalty by the Commissioner.

Issue 1: Wrong taking of Modvat credit on three counts
The appellant was alleged to have wrongly taken Modvat credit on three counts: parts of glass tube forming machinery exported without reversing credit, a compressor, and a shrink wrapping machine. The appellant contended that the provisions of Rule 57F(1)(ii) applied, but the department argued that the items were not inputs, as admitted by the appellant in response to the show cause notice. The tribunal found the denial of credit justified as the appellant's current stand contradicted its earlier admission, rejecting claims of coercion by departmental authorities.

Issue 2: Denial of credit and imposition of penalty by the Commissioner
Regarding the compressor and shrink wrapping machine, the tribunal accepted the compressor as integral to the glass tubing forming machinery but rejected the shrink wrapping machine as it was not a component of the machinery. The third item involved spares for the machine, which the appellant kept in stock but could not utilize due to halted manufacturing operations. The tribunal upheld the reversal of credit on these spares. A penalty of Rs. 15 lakhs was imposed for wrongly taking credit of Rs. 20 lakhs, with a reduction to Rs. 10 lakhs considering the duty involved. The tribunal found no grounds to set aside the penalty, except for a possible belief by the appellant regarding the compressor and shrink wrapping machinery, emphasizing the lack of explanation for not reversing the credit earlier despite halted manufacturing activities.

In conclusion, the tribunal partially allowed the appeal, upholding the denial of credit and penalty imposition, except for a reduction in the penalty amount.