2008 (2) TMI 789 - AT - Central Excise

Cenvat/Modvat credit - Capital goods - job-work - Held that - if the capital goods are sent to the job workers factory on account of any reasons, Modvat credit should not be denied to the main manufacturer - For the same reasons, no penalties are required to be imposed - except for penalty of ₹ 2000/- on M/s. Vishal Malleables Ltd. for non-maintenance of proper records, appeals are allowed - decided partly in favor of appellant.

Summary

Issues:
1. Confiscation of seized goods and imposition of penalty.
2. Denial of Modvat credit for Grinding Wheels, confiscation, and penalty.

Analysis:

Issue 1: Confiscation of seized goods and imposition of penalty:
The appellants, engaged in manufacturing Malleable castings, faced confiscation and penalty proceedings due to discrepancies found during a visit by Central Excise officers. The officers seized an excess quantity of Malleable Iron Castings and discovered Grinding Wheels for which Modvat credit was availed. The seized goods were later released, entered in RG1, and cleared after duty payment. The main contention was whether the goods were intended for Railways and if there was any mala fide intent in not entering them in RG1. The Tribunal found no evidence of mala fide intent and cited precedents to support that non-entry in RG1 without mala fide does not warrant confiscation or penalty. Consequently, the confiscation of Malleable Iron Castings was set aside, and the penalty for non-maintenance of records was reduced to Rs. 2,000.

Issue 2: Denial of Modvat credit for Grinding Wheels, confiscation, and penalty:
Regarding the demand of duty and confiscation of Grinding Wheels found in an adjacent unit, the appellants argued that the unit was part of their main factory, and no manufacturing activity occurred there despite a separate registration certificate. Citing relevant decisions, the Tribunal held that if capital goods were sent to a job worker's factory due to space constraints, Modvat credit should not be denied to the main manufacturer. Consequently, the denial of Modvat credit, confiscation, and penalty related to the Grinding Wheels were set aside based on the established legal principles. In conclusion, except for a reduced penalty of Rs. 2,000 for non-maintenance of records, the impugned orders were set aside, and the penalties on the other appellants were also revoked.

This judgment by the Appellate Tribunal CESTAT, Ahmedabad, provided a detailed analysis of the issues surrounding the confiscation of seized goods, imposition of penalties, and denial of Modvat credit. The decision was based on legal precedents and interpretations of the Central Excise Tariff Act, 1985, ensuring a fair and reasoned outcome for the appellants involved in the case.