2003 (2) TMI 380 - AT - Central Excise

Summary

Issues:
- Appeal against duty demand and penalty for denial of Modvat credit before installation of capital goods.

Analysis:
The appeal was filed against the order-in-appeal affirming the duty demand and penalty imposed due to the denial of Modvat credit amounting to Rs. 3,65,624/-, which the appellants availed before the installation and utilization of capital goods for manufacturing Glazed Ceramic Tiles. The appellants availed the Modvat credit between December 1997 to March 1998, while the machinery was installed later, and the registration certificate for producing Glazed Ceramic Tiles was obtained only on 26-12-1998. The adjudicating authority disallowed the Modvat credit as it was taken in contravention of Rule 57Q(7), a decision upheld by the Commissioner (Appeals).

The counsel for the appellants argued that after the installation and utilization of capital goods in manufacturing Glazed Ceramic Tiles, they were entitled to the Modvat credit, even if initially availed wrongly. The counsel contended that it was a revenue-neutral situation, which was not considered by the lower authorities before disallowing the credit. On the contrary, the learned SDR argued that the Modvat credit was illegitimately availed before the installation of capital goods, making the order of the Commissioner (Appeals) valid.

Upon hearing both sides and examining the records, the judge noted that although the Modvat credit was taken before the installation of capital goods, the appellants started manufacturing Glazed Ceramic Tiles in December 1998. The judge observed that the authorities had not considered whether the appellants, after initially availing the credit wrongly, became entitled to it once they complied with the rules. Citing a previous case, the judge decided to send the matter back to the adjudicating authority for a re-examination in the interest of justice.

Consequently, the judge set aside the order of the Commissioner (Appeals) and directed the adjudicating authority to reconsider the case after hearing both parties. The appeal was disposed of accordingly.