2010 (4) TMI 1094 - AT - Central Excise

Summary

Issues involved: Disallowance of MODVAT credit on certain capital goods and imposition of penalty against the appellants.

Issue I - Credit availed on original invoices without prior permission:
The appellants availed MODVAT credit on original invoices without prior permission, leading to a demand of Rs. 66,00,257/- and a penalty. The appellant argued that they followed the provisions of Rule 57T (8) and applied for permission, but the jurisdictional Assistant Commissioner did not act on their application for over five years. The Tribunal found the disallowance of credit on original invoices to be unsustainable and allowed the appeal on this ground.

Issue II - MODVAT credit on power transformer and compliance with Rule 57R(3):
The appellant availed MODVAT credit of Rs. 23.00 lakhs on a damaged transformer, which was repaired and cleared by the supplier. The appellant contended that they followed Rule 57R(3) and there was no violation. The Tribunal held that the disallowance of credit on the transformer was not sustainable and set aside the impugned order.

Issue III - MODVAT credit on various items and eligibility for credit:
The appellant did not press for MODVAT credit on certain items during adjudication. The Tribunal upheld the disallowance of credit on printer ribbon cable and cafi cored wire. The fire fighting equipment was excluded from the definition of capital goods at the time. The appellant failed to establish the eligibility of credit on nozzles. The appeal was dismissed on these grounds.

Penalty related issue:
The penalty imposed under Rule 57U (6) of Central Excise Rules 1944 was linked to the limitation issue, which was remanded for further consideration. The Tribunal set aside a portion of the penalty and allowed the appeal on this aspect.

In conclusion, the Tribunal allowed the appeal in part, setting aside the disallowance of MODVAT credit on original invoices and the transformer, remanding the issue of limitation and penalty, and upholding the dismissal of credit on certain items.