2006 (11) TMI 57 - AT - Central Excise

Cenvat/Modvat Revenue contended that appellant is not liable to modvat credit on the inputs received No evidence were submitted in support of allegation Revenue contention rejected and allowed credit to appellant

Summary

Issues:
Appeal against order-in-appeal setting aside order-in-original confirming duty demand and penalties on respondent for availing Modvat credit on inputs; Respondent resisting show cause notice on time-bar and merits grounds; Commissioner (Appeals) setting aside order-in-original; Revenue appealing against Commissioner's decision.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi, involved a dispute regarding the respondent availing Modvat credit on inputs used for a painting system. The respondent claimed the inputs were used for fabrication of a complete painting system and had received them under Chapter sub-heading No. 84.79. However, a show cause notice was issued to deny the Modvat credit based on reclassification of the goods by the supplier under sub-heading No. 84.24, which was deemed ineligible for Modvat credit as capital goods. The adjudicating authority confirmed the demand and imposed penalties, but the Commissioner (Appeals) disagreed and set aside the order-in-original entirely, leading to the revenue's appeal.

Despite the respondent not appearing, the Tribunal considered the matter. The Commissioner (Appeals) had set aside the order-in-original on merits, emphasizing that the goods received were in SKD condition and assembled into a painting system by the respondent. The Commissioner cited a Tribunal judgment regarding classification of goods and held that the denial of Modvat credit was unjustified, as the goods were essentially component parts and not a complete machine. The Commissioner's decision was deemed legally sound and correct, warranting no interference.

Further scrutiny revealed that the show cause notice issued to deny Modvat credit was misconceived and time-barred. The notice was based on the supplier's reclassification of goods, with no evidence of collusion by the respondent in misclassification. The Tribunal found the impugned order to be free of any defects and upheld it, ultimately dismissing the revenue's appeal. The judgment highlighted the importance of proper classification and the lack of evidence supporting allegations against the respondent, leading to the dismissal of the appeal.

In conclusion, the Tribunal's decision affirmed the Commissioner (Appeals)'s ruling, emphasizing the legality of the respondent's claim for Modvat credit on inputs used for the painting system. The judgment underscored the necessity for accurate classification and the absence of evidence to support claims of collusion, resulting in the dismissal of the revenue's appeal.