2005 (4) TMI 474 - AT - Central Excise

Summary

Issues:
- Modvat credit disallowed by Assistant Commissioner
- Appeal against Order-in-Appeal No. 609/03 dated 12-11-2003
- Reversal and re-credit of Modvat credit
- Lack of response from the Department
- Application of Rule 57Q of the Central Excise Rules 1944

Modvat Credit Disallowed by Assistant Commissioner:
The case involved the disallowance of Modvat credit taken by the respondents on duty paid capital goods. The Assistant Commissioner, through Order-in-Original No. 269/01, disallowed the Modvat credit taken suo motu by the respondents on the grounds that they cannot take credit again after reversing it. However, the Commissioner (Appeals) set aside this decision based on the argument that the credit was initially reversed under protest and subsequently re-credited by the respondents.

Appeal Against Order-in-Appeal No. 609/03 Dated 12-11-2003:
The Revenue filed an appeal against Order-in-Appeal No. 609/03 dated 12-11-2003, where the Commissioner (Appeals) had upheld the Modvat credit taken by the respondents. The Revenue contested this decision, leading to the current appeal before the Appellate Tribunal CESTAT, New Delhi.

Reversal and Re-Credit of Modvat Credit:
The respondents initially reversed the Modvat credit under protest, citing that it was done under pressure from the Audit party. Subsequently, they re-credited the Modvat amount without any response from the Department. The Commissioner (Appeals) relied on a previous Tribunal decision to support the re-crediting of the amount reversed earlier, as the respondents had approached the Assistant Commissioner and received no response before re-crediting.

Lack of Response from the Department:
Despite the respondents' actions of reversing the credit under protest and subsequent re-crediting, the Department did not issue any show cause notice or Adjudication order disallowing the Modvat credit. The Department acknowledged the protest letter but took no further action to regularize the situation, leading to the Commissioner (Appeals) upholding the re-credit based on lack of response from the Department.

Application of Rule 57Q of the Central Excise Rules 1944:
The issue of whether the goods in question qualified as capital goods under Rule 57Q of the Central Excise Rules 1944 was central to the dispute. The initial disallowance of Modvat credit by the Assistant Commissioner was based on the finding that certain goods for which credit was taken did not meet the definition of capital goods under the said rule. However, the Commissioner (Appeals) overturned this decision considering the circumstances surrounding the reversal and re-crediting of the Modvat amount.

In conclusion, the Appellate Tribunal CESTAT, New Delhi rejected the Revenue's appeal, upholding the Commissioner (Appeals) decision regarding the Modvat credit taken by the respondents. The judgment highlighted the importance of procedural regularity and the Department's lack of action in response to the respondents' actions, ultimately leading to the rejection of the appeal.