2002 (11) TMI 646 - AT - Central Excise

Summary

Issues:
Appeal against disallowance of Modvat credit and penalty reduction.

Analysis:
The appeal was filed against the order-in-appeal affirming the disallowance of Modvat credit of Rs. 2,56,409 but reducing the penalty from Rs. 1 lakh to Rs. 50,000. The appellants had availed Modvat credit on various items, and a show cause notice was issued for wrongly claiming credit. The adjudicating authority confirmed the demand, stating the items did not qualify as capital goods under Rule 57Q. The Commissioner (Appeals) allowed Modvat credit on some items not challenged by the revenue. The appellants argued that the disputed items fell under Heading 8414.80 of the CETA, making them eligible for Modvat credit as capital goods under Rule 57Q.

Upon hearing the JDR, it was observed that Rule 57Q excludes all goods falling under Heading 84.14 of the CETA from claiming Modvat credit. The Commissioner (Appeals) rightly disallowed the credit as the disputed goods did not meet the criteria under this Rule. Reference to a previous case was made, clarifying that the items in question were not eligible for Modvat credit. The denial of credit on certain items like channels, dia axle flow fan, air distributor plate, fresh air damper, and return air tight door was justified as they did not qualify as capital goods under Rule 57Q. The decision of the Commissioner (Appeals) aligned with the provisions of the Rule.

The Modvat credit disallowed by the adjudicating authority on some items was allowed by the Commissioner (Appeals), and this part of the order was not challenged by the Revenue. Similarly, the Commissioner (Appeals) reversed the decision on the capicitor starter, allowing the credit, which was not contested by the Revenue. Consequently, the order disallowing Modvat credit on certain items was upheld as valid and legally sound, leading to the dismissal of the appeal due to lack of merit.