1999 (10) TMI 692 - AT - Central Excise

Summary

Issues:
1. Rectification of Mistake (ROM) applications filed by the assessee and the Revenue.
2. Imposition of penalty for wrongly taking Modvat credit.
3. Eligibility of items for Modvat credit under Rule 57Q.
4. Reference application by Revenue on whether certain items qualify as capital goods under Rule 57Q.

Issue 1: Rectification of Mistake (ROM) Applications:
The assessee's counsel argued that penalty was not warranted based on previous Tribunal judgments. The Tribunal found a mistake in its order and allowed the assessee's ROM, setting aside the penalty imposition. The Revenue's ROM was also considered, and a mistake was identified regarding the eligibility of certain items for Modvat credit, leading to a modification in the Tribunal's order.

Issue 2: Imposition of Penalty for Wrongly Taking Modvat Credit:
The Revenue contended that penalty should be imposed for wrongly taking Modvat credit, citing Rule 173Q(1)(2b) and emphasizing that no mens rea is necessary for penalty imposition. The Tribunal differentiated the case cited by the Revenue, concluding that a mistake had occurred in the order and penalty imposition was not sustainable, aligning with previous Tribunal decisions.

Issue 3: Eligibility of Items for Modvat Credit under Rule 57Q:
The Tribunal analyzed the eligibility of items like electric wires, cables, and oil tanks for Modvat credit under Rule 57Q. It found that a mistake had occurred in the order regarding the allowance of Modvat credit on certain items, leading to the modification of the order to rectify the error.

Issue 4: Reference Application on Capital Goods Eligibility:
The Revenue filed a reference application questioning whether specific items qualified as capital goods under Rule 57Q. The Tribunal considered the arguments presented and decided to refer the point of law to the Hon'ble Madhya Pradesh High Court for clarification, based on previous Tribunal decisions and the need to settle the law on the issue.

Statement of Facts:
The case involved M/s. Bansali Engineering Polymers taking Modvat credit on electric wires, cables, and oil tanks. The Department disputed the eligibility of these items as capital goods under Rule 57Q, leading to a Tribunal decision in favor of the assessee. The Tribunal's consistent view on Modvat credit admissibility culminated in a Larger Bench decision. Due to subsequent government notifications mentioning these items, the matter was referred to the Hon'ble MP High Court for clarification.