2007 (1) TMI 452 - AT - Central Excise

Summary

Issues involved: Disallowance of Modvat credit on inputs, imposition of penalty equal to duty, whether the process amounts to manufacture, admissibility of credit on duty paid on final product.

In this case, the Appellate Tribunal CESTAT, Mumbai considered the disallowance of Modvat credit amounting to Rs. 1,60,75,217/- on inputs, with an additional penalty imposed on the appellants for wrongly taking credit as the final product was deemed not a result of manufacture. The main contention was whether the process conducted by the appellants could be classified as manufacturing. Alternatively, the appellants argued that even if the process did not amount to manufacture, they should still be entitled to credit based on previous Tribunal decisions. The Department, represented by the ld. SDR, argued that credit cannot be granted as the process did not constitute manufacture, emphasizing that credit is only applicable to inputs used in or in relation to the manufacture of the final product.

After hearing both sides and examining the relevant case laws cited, the Tribunal acknowledged that duty had indeed been paid on the final product. Following the precedent set by previous judgments, including those in Creative Enterprises v. CCE, Surat, Commissioner of Central Excise, Indore v. M.P. Telelinks Ltd., and Stumpp Scheule and Somappa Ltd. & Anr. v. CCE, Bangalore-I, the Tribunal concluded that the denial of credit and the penalty should be set aside. Consequently, the Tribunal allowed the appeal, ruling in favor of the appellants.