2005 (5) TMI 584 - AT - Central Excise

Summary

Issues:
1. Availing Modvat credit on inputs used in manufacturing final products.
2. Allegation of not using electric motors and cables in manufacturing Rocker Shovel Loaders.
3. Disallowance of credit and proposed recovery under Section 11A and Rule 57-I.
4. Lack of one-to-one correlation between credit availed and duty payment.
5. Tribunal's precedent regarding the use of credit earned on inputs in discharging duty on final products.

Analysis:
The appellant availed Modvat credit on inputs used in manufacturing final products, including two types of Loaders. A show cause notice was issued, alleging that electric motors and cables were not used in manufacturing Rocker Shovel Loaders, despite the appellant claiming credit and utilizing it for duty payment. The authorities below confirmed the demand and imposed a penalty, contending that the credit was utilized for duty payment. The appellant argued that a consolidated credit account was maintained, and there was no direct correlation between the credit and duty payment for specific products.

Upon review, it was found that the credit availed for electrical motors and cables was not necessarily used for discharging duty on the specific loader where these inputs were not utilized. The appellant maintained a consolidated credit entry for all inputs, making it challenging to link specific credits to duty payments for individual products. Citing a precedent involving Novartis India Ltd., the Tribunal clarified that credits earned on inputs from one chapter could be used to discharge duty on products from another chapter. This established legal principle did not necessitate further support from additional decisions.

The judgment emphasized that even if duty was paid from the PLA, the disputed credit could have been utilized for duty payment on other loaders where electric motors and cables were used. Given the lack of a direct correlation between specific credits and duty payments for particular products, the impugned orders were deemed unjustified and subsequently set aside during the pronouncement in court on 13-5-2005.