2010 (7) TMI 860 - AT - Central Excise

Summary

Issues:
1. Utilization of MODVAT Credit on imported turbochargers for duty payment.
2. Reversal of MODVAT Credit on original pair of turbochargers.
3. Applicability of Rule 173H of the Central Excise Rules, 1944.
4. Imposition of penalty under Section 11AC of the Act.

Analysis:

1. Utilization of MODVAT Credit on imported turbochargers for duty payment:
The case involved the clearance of a diesel engine by availing MODVAT Credit of CVD paid on a pair of turbochargers imported and fitted into the engine. The engine was damaged during transit and repaired, with a new pair of turbochargers imported and used in the repairs. The appellant paid duty on the engine by utilizing MODVAT Credit of the CVD paid on the new pair of turbochargers. The Tribunal found the appellant entitled to take MODVAT Credit on the imported components and utilize it for duty payment. The clearance of the engine on 27-4-96 after repairs was lawful, and the appellant had paid appropriate duty on the full assessable value using MODVAT Credit.

2. Reversal of MODVAT Credit on original pair of turbochargers:
The department demanded the appellant to reverse the MODVAT Credit taken on the original pair of turbochargers. However, the Tribunal held that the appellant was justified in utilizing the MODVAT Credit of CVD paid on the imported components for duty payment. The lower authorities were deemed unjustified in upholding the department's proposal for reversal of the MODVAT Credit.

3. Applicability of Rule 173H of the Central Excise Rules, 1944:
The case involved the application of Rule 173H for bringing back the damaged engine for repairs and subsequent clearance without payment of duty. The Tribunal noted that the clearance of the repaired engine without duty payment under Rule 173H was in accordance with the law, and the Revenue had no grievances regarding this aspect of the transactions.

4. Imposition of penalty under Section 11AC of the Act:
The original authority imposed a penalty on the appellant, which was later vacated by the Commissioner (Appeals) under Section 11AC of the Act. The Tribunal upheld the decision to vacate the penalty, thereby providing relief to the appellant in this regard.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, emphasizing the lawful utilization of MODVAT Credit, the compliance with Rule 173H, and the removal of the penalty imposed under Section 11AC of the Act.