2007 (8) TMI 565 - AT - Central Excise

Cenvat/Modvat - Welding electrodes - Structurals of general nature - Asbestos packing and red led non-setting - Penalty - Imposition of

Summary

Issues Involved:
1. Denial of Modvat credit on various items claimed as capital goods.
2. Imposition of penalties and demand for interest.
3. Classification of items as capital goods or inputs.
4. Eligibility of specific items for Modvat credit.
5. Interpretation of relevant rules and precedents.

Detailed Analysis:

1. Denial of Modvat Credit on Various Items Claimed as Capital Goods
The core issue in all four appeals revolves around the denial of Modvat credit on items such as Welding Electrodes, Plates, Angles, Channels, and other materials. The adjudicating authority and the Commissioner (Appeals) held that these items did not qualify as capital goods under Rule 57Q of the erstwhile Rules. The items were used for day-to-day repairing and maintenance work and not in the manufacture of final products. The Tribunal in CCE, Noida v. M/s. DSM Ltd. (2003) supported this view.

2. Imposition of Penalties and Demand for Interest
Penalties equal to the amount of Modvat credit denied and interest were imposed on the appellant. The adjudicating authority found that the appellant had wrongly availed Modvat credit, leading to penalties and interest demands.

3. Classification of Items as Capital Goods or Inputs
The appellant contended that the disputed items should be considered as capital goods or, alternatively, as inputs eligible for Modvat credit. The appellant cited several precedents, including Kisan Co-operative Sugar Factory Ltd. v. Commissioner of Central Excise, Meerut-I (2007), arguing that wrong mention of the heading under which they are claimed should not affect the entitlement if the goods are otherwise eligible.

4. Eligibility of Specific Items for Modvat Credit
- Welding Electrodes: The Tribunal, referencing Jaypee Rewa Plant v. Commissioner of Central Excise, Raipur (2003), and Triveni Engg. & Industries Ltd. v. CCE, Meerut (2005), held that welding electrodes used for maintenance and repairs were not eligible for Modvat credit as capital goods.
- Structural Items (Plates, Angles, Channels): These items were considered of general nature and used for fabrication of steel structures, not as parts/components/accessories of machinery, thus ineligible for Modvat credit.
- Asbestos Packing and Red Led Non Setting: The Tribunal found these items eligible for Modvat credit, referencing CCE, Meerut-II v. Kisan Sahkari Chini Mills Ltd. (2007).
- Set of Brake Liners, Plunger Type Pumping Unit, and Trash Plate: These items were deemed parts of capital goods, making them eligible for Modvat credit.
- Cables and Copper Conductors: These items were of general nature and not shown to be components, parts, or accessories of machinery, thus ineligible for Modvat credit.

5. Interpretation of Relevant Rules and Precedents
The Tribunal noted that the headnote in Kisan Co-operative Sugar Factory Ltd. v. Commissioner of Central Excise, Meerut-I (2007) was incorrect and contradicted the body of the judgment. The Tribunal emphasized the binding nature of the decision in Commissioner of Central Excise, Indore v. Surya Roshni Ltd. (2001), which stated that goods claimed as inputs could not get Modvat credit as capital goods.

Conclusion:
The Tribunal upheld the denial of Modvat credit for welding electrodes and structural items, confirming the penalties and interest imposed. However, it allowed Modvat credit for asbestos packing, red led non setting, brake liners, plunger type pumping unit, and trash plate. The penalty imposed for welding electrodes was set aside due to conflicting views in earlier decisions. The appeals were dismissed with modifications, directing the adjudicating authority to re-quantify the amounts payable by the appellant.