2015 (7) TMI 1172 - AT - Central Excise

MODVAT credit - period from October 1999 to December 1999 - manufacture of sugar and molasses falling under chapter 17 of the First Schedule to the Central Excise Tariff Act 1985 - Rule 57 G/ 57 T of the Central Excise Rules 1944 - welding electrodes - denial on the ground that some of the disputed goods are not covered in the definition of capital goods - denial also on the ground that Non-filing of declaration by appellant before taking credit. Welding electrodes - Held that - With regard to the eligibility of modvat benefit on welding electrodes the Tribunal in the earlier round of proceedings has decided negatively against which the appellant has not preferred any appeal before the higher appellate authorities. Thus I am not expressing any opinion on this aspect and the original authority is at liberty to recover the same if not already paid by the appellant. Non-filing of declaration by appellant before taking credit - Held that - With regard to non-filing of declaration by the appellant before taking modvat credit I find that the receipt and utilization of the impunged goods have not been disputed by the authorities below. Thus in such an event non-filing will be construed as mere procedural lapse for which the substantive right conferred under the statute cannot be whittled down and the benefit cannot be denied to the appellant. Hence I am of the view that denial of modvat benefit on the ground of non-filing of declaration is not a justifiable ground and as such the appellant is eligible for the cenvat credit on these point. Eligibility as capital goods - Held that - With regard to denial of modvat benefit on the ground that the disputed goods are not covered under the definition of capital goods I find that the authorities below have not recorded any specific reason in support of their contention. It is observed that the appellant has given ample justification in their reply to the show cause notice as well as in the appeal memorandum filed before the First Appellate Authority explaining the reasons for their eligibility to the modvat benefit. Therefore I am of the view that the matter is required to be remanded back to the Original Authority for consideration of the submissions made before him by the appellant with regard to the eligibility aspect of the disputed goods and thereafter for passing a reasoned and speaking order. The appellant is eligible for the modvat benefit which was disallowed to it for non filing of declaration. With regard to the dispute about coverage of capital good under the definition the impugned order is set aside and the matter is remanded to the Original Authority for passing a reasoned and speaking order taking into consideration the submissions made/ to be made by the appellant. The penalty imposed under Rule 173 Q in the impugned order is set aside - appeal disposed off - decided partly in favor of appellant - matter on remand.

Summary

Issues Involved:
1. Denial of modvat credit on welding electrodes.
2. Non-submission of declaration for modvat credit.
3. Denial of modvat benefit on the ground of goods not being capital goods.

Issue 1: Denial of Modvat Credit on Welding Electrodes:
The appellant, engaged in sugar and molasses manufacturing, had modvat credit denied by the Central Excise Department for the period from October 1999 to December 1999. The Tribunal had previously denied credit on welding electrodes, which the appellant did not contest. The original authority reduced the duty demand in the denovo adjudication order. The Commissioner (Appeals) confirmed the denovo adjudication order, leading to the present appeal. The appellant argued that non-filing of declaration under Rule 57-T was a procedural lapse and should not deny substantive right to take modvat credit. The Tribunal found that the appellant was eligible for modvat credit despite the non-filing of declaration, citing relevant case laws. The Tribunal did not express an opinion on the welding electrodes issue.

Issue 2: Non-Submission of Declaration for Modvat Credit:
The appellant contended that denial of modvat credit for non-filing of declaration was unjustifiable. The appellant referenced specific items in the show cause notice for which credit was denied due to non-submission of declaration. The Tribunal held that since the receipt and utilization of the goods were not disputed, non-filing of declaration was a procedural lapse and should not deny the appellant the substantive right to take the credit. The Tribunal referred to previous judgments where modvat credit was allowed under similar circumstances, concluding that denial based on non-filing of declaration was not justified.

Issue 3: Denial of Modvat Benefit Due to Goods Not Being Capital Goods:
The appellant argued that the original order did not provide specific reasons for denying modvat benefit on the grounds that certain goods were not considered capital goods. The appellant had justified the eligibility of the goods for modvat credit in their submissions. The Tribunal observed that the authorities had not given reasons for their contention and decided to remand the matter back to the Original Authority for a reasoned order. The Tribunal listed specific items from the show cause notice for which modvat benefit was denied based on the goods not being classified as capital goods.

In conclusion, the Tribunal ruled in favor of the appellant, allowing modvat credit that was previously denied for non-filing of declaration and remanding the issue of goods not being capital goods back to the Original Authority for a reasoned decision. The penalty imposed was set aside, and the appeal was disposed of accordingly.