2004 (2) TMI 561 - AT - Central Excise

Summary

Issues Involved:
1. Legality of availing Modvat Credit on capital goods not owned by the appellant.
2. Suppression of facts and invocation of the extended period of limitation.
3. Imposition of mandatory penalties under Rule 57U(6) and Rule 173Q(1)(bb).

Issue-wise Detailed Analysis:

1. Legality of Availing Modvat Credit on Capital Goods Not Owned by the Appellant:
The appellants argued that ownership of capital goods is not a criterion for availing Modvat Credit. They cited several Tribunal judgments, including Sharda Motors Industries Ltd. v. CCE, Chennai-II, which held that credit cannot be denied even if capital goods are not owned by the assessee. The Tribunal also referred to the Central Board's Circular No. 263/8/89, which specified that Modvat Credit facilities are available in cases of purchases as well as stock transfers. The appellants contended that they had permissive possession of the capital goods under a "Leave & Licence Agreement" with M/s. HMIL, and thus fulfilled the conditions for availing Modvat Credit.

The Tribunal noted that the agreement between the appellants and M/s. HMIL was not initially provided to the department or the Tribunal. The agreement was scrutinized and found to be lacking in several respects, including the absence of a date of execution and discrepancies in signatures. The Tribunal concluded that the agreement appeared to be a cover-up for an already executed transaction, and thus, the appellants did not have a valid agreement to support their claim for Modvat Credit.

2. Suppression of Facts and Invocation of the Extended Period of Limitation:
The appellants argued that they had filed RT 12 returns and declarations under Rule 57T, and thus, there was no suppression of facts. However, the Tribunal found that the appellants had consciously avoided providing information about the exact nature of acquisition of the capital goods. The Tribunal held that the appellants had failed to disclose vital information, justifying the invocation of the extended period of limitation for the demand of duty.

3. Imposition of Mandatory Penalties under Rule 57U(6) and Rule 173Q(1)(bb):
The Tribunal upheld the demand for duty but reduced the mandatory penalty under Rule 57U(6) from Rs. 1,09,39,967/- to Rs. 55,00,000/-. The penalty under Rule 173Q(1)(bb) was also reduced from Rs. 10,00,000/- to Rs. 5,00,000/-. The Tribunal found that while the appellants had committed infractions, the interests of justice would be served by reducing the penalties.

Separate Judgments Delivered by the Judges:
- Majority Judgment: The majority, including Member (J) and the third Member (T), held that the appellants were entitled to avail Modvat/Cenvat Credit on the capital goods received from M/s. HMIL. They found no suppression of facts and no cause for imposing penalties. The majority set aside the impugned order and allowed the appeal with consequential relief.
- Dissenting Judgment: Member (T) disagreed, holding that the appellants had not provided a valid agreement and had suppressed facts, justifying the demand for duty and the imposition of penalties, albeit reduced.

Majority Order:
The impugned order was set aside, and the appeal was allowed with consequential relief, as per the majority decision.