2014 (8) TMI 1022 - AT - Central Excise

Cenvat Credit - erstwhile Rules 57T(1) and 57T(2) - declaration made by appellants were not in terms of a purported Trade Notice issued by the respondent - Held that - the necessary declaration was made by the appellant. - The only ground on which credit has been denied is thus without any basis. - Credit allowed.

Summary

Issues involved:
- Proper declaration under Rule 57T(1) and intimation under Rule 57T(2) not filed
- Denial of MODVAT credit on certain capital goods
- Alleged procedural lapses leading to demand of Excise duty and penalty
- Appellant's contention on Trade Notice not being binding
- Appellant's argument on timely filing of declarations for MODVAT credit
- Lack of technical reasons provided for disallowing MODVAT credit
- Applicability of amendments to Rule 57T and Circulars
- Interpretation of what qualifies as capital goods
- Legal principles governing MODVAT credit availment

Analysis:
The appeal before the CESTAT Mumbai concerned the denial of MODVAT credit by the Commissioner of Central Excise & Customs to the appellant, SKF India Ltd., for the period from October 1994 to January 1995. The primary issue was the failure of the appellant to file proper declarations under Rule 57T(1) and provide intimation under Rule 57T(2) as required by the newly introduced rules. Additionally, some items were deemed not to qualify as capital goods, leading to the demand for payment of Excise duty and penalty amounting to Rs. 49,18,799.85 and Rs. 2 lacs, respectively.

The appellant contended that any breach of a Trade Notice, such as the one issued by the respondent, should not result in the imposition of duty or penalty. They argued that the department should have considered their declarations for MODVAT credit, given the novelty of the concept and the time required for understanding the new rules. The appellant also highlighted the lack of technical reasons provided for disallowing the credit and the absence of a reasonable opportunity to challenge the decision.

Moreover, the appellant's counsel cited legal provisions and precedents to support their case, including the amendment to Rule 57T in 1999, which clarified that credit should not be denied for procedural lapses if certain conditions were met. They also referenced a CESTAT decision and a Supreme Court ruling on the interpretation of what constitutes capital goods, emphasizing that the items need not be directly used in the final product but must be utilized in the factory of production.

After hearing both parties, the CESTAT Mumbai Member, Shri Anil Choudhary, relied on the decision of a Larger Bench and the amended provisions of Rule 57T to conclude that the denial of credit to the appellant lacked a valid basis. The Member highlighted the importance of the recent amendments and circulars in guiding the assessment of MODVAT credit cases, emphasizing the need for a thorough examination of duty payment and goods utilization before denying credit on procedural grounds.

Ultimately, the CESTAT allowed the appeal, setting aside the Order-in-Original and granting consequential relief to the appellant in accordance with the law. The detailed analysis of legal provisions, precedents, and procedural requirements formed the basis for the tribunal's decision in favor of SKF India Ltd., highlighting the significance of compliance with statutory rules and the fair treatment of taxpayers in excise duty matters.