2004 (5) TMI 512 - AT - Central Excise

Summary

Issues:
- Disallowance of Modvat credit
- Imposition of penalty

Analysis:
The appeal was filed against an order disallowing Modvat credit of Rs. 27,687 and imposing a penalty of Rs. 1,000. The appellants, engaged in manufacturing Pistons, Piston pins, and Piston rings, imported machines known as 'Master Cam Finish' and availed Modvat credit on CVD duty paid on the capital goods. Subsequently, the same goods were removed for repair to the original manufacturer in Germany and re-imported after payment of duty on repair charges. The issue arose when the credit was disallowed on the grounds that the original invoice was not a valid duty paying document since no capital goods were received against it after export. The adjudicating authority upheld the demand and penalty. The appellant argued that they followed Rule 57-S, removing capital goods for repair after intimation and reversing the credit by mistake. They contended that denial of credit based on the original invoice not being a valid duty paying document was unsustainable.

The Revenue contended that the appellants did not follow the procedure under Rule 57-S(7) as the invoice used for clearance did not indicate goods were removed for repair. They argued that taking credit afresh under the same invoice was not in compliance with Central Excise Rules. The undisputed facts revealed that the appellants imported capital goods, informed the Revenue authority about removal for repair, reversed the credit, sent the goods to Germany for repair, and re-imported them after paying duty on repair charges. The Revenue did not dispute these factual aspects. The only contention was regarding the validity of the original invoice as a duty paying document for re-imported goods. Rule 57-S(7) allows removal of capital goods for repair after intimation and acknowledgment, which the appellants complied with. The denial of credit was deemed unsustainable as the goods were removed for repair following due process. Consequently, the impugned order disallowing credit and imposing penalty was set aside, and the appeal was allowed.