2005 (7) TMI 391 - AT - Central Excise

Summary

Issues:
1. Entitlement of M/s. SRIL to avail Modvat credit on cuttings of plates, sheets, etc., supplied by SCPL.
2. Allegation against SCPL for abetment of offence committed by SRIL.
3. Disallowance of Modvat credit and imposition of penalties by the adjudicating authority.

Analysis:

Entitlement of M/s. SRIL to avail Modvat credit:
The case revolved around whether M/s. SRIL were entitled to avail Modvat credit on the cuttings of plates, sheets, etc., supplied by SCPL. The department contended that the goods received by SRIL were considered scrap and, therefore, they were not eligible for the credit. However, it was argued that the cuttings were of plates and sheets falling under Heading 72.08, and the thickness of the goods was not reduced during the cutting process. As per the classification under Chapter 72 of the CETA Schedule, the area was the relevant parameter, and the cuttings were correctly declared by SRIL. Since SRIL did not exceed the duty paid on the cuttings by SCPL, they were deemed eligible for the credit. Consequently, it was held that SRIL were indeed entitled to avail Modvat credit on the cuttings under Heading 72.08.

Allegation against SCPL for abetment:
The department alleged that SCPL, a registered first stage dealer, was not authorized to deal in scrap classified under Heading 72.04 and, therefore, could not pass on Modvat credit on materials other than MS sheets and plates under Heading 72.08. However, it was argued that SCPL was only dealing in sheets, plates, etc., and the cuttings supplied to SRIL were correctly declared. Since SRIL was eligible for the credit, no offence could be attributed to SCPL regarding the regular availment of credit by SRIL. Consequently, the allegation against SCPL for abetment was dismissed.

Disallowance of Modvat credit and imposition of penalties:
The adjudicating authority had disallowed Modvat credit to SRIL, imposed penalties under Rule 57AH(2) of the Central Excise Rules, 1944, and penalized SCPL under Rule 209A. However, upon review, it was found that SRIL had correctly availed the credit on the cuttings under Heading 72.08. Therefore, the impugned orders disallowing the credit and imposing penalties were set aside, and the appeals by both parties were allowed.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the ultimate decision reached by the Appellate Tribunal CESTAT, CHENNAI.