2007 (6) TMI 90 - AT - Central Excise

Cenvat/Modvat - Department contended that appellant is not entitle for credit on the ground that they used the capital goods in the Air-Conditioning Plant which is excluded from the Modvat credit Held that department contention was not correct and set aside

Summary

Issues involved:
Denial of modvat credit on specific capital goods

Detailed Analysis:
The case involves two appeals against the same Order-in-Appeal, with the Revenue appealing against the denial of modvat credit and the assessee contesting the same denial. The issue revolves around the denial of modvat credit on various capital goods used by the assessee in an Air-Conditioning Plant. The department argued that since the Air-Conditioning Plant is excluded from modvat credit eligibility, the parts used in it should also be ineligible. Initially, the adjudicating authority ruled against the assessee, but the Commissioner (Appeals) reversed this decision. However, the Tribunal set aside the Commissioner's order and remanded the matter for reconsideration. Subsequently, the adjudicating authority dropped the proceedings against the assessee regarding the denial of modvat credit. The Revenue then appealed the Commissioner's decision, leading to the current appeals being disposed of together.

The advocate for the assessee relied on previous Tribunal decisions to support their case, emphasizing that the classification of items on invoices determines modvat credit eligibility. The Department's representative argued for a remand to clarify certain issues not addressed by the Commissioner (Appeals). After considering the arguments and examining the records, it was found that the items were purchased for factory use with classifications matching those on the invoices. The Commissioner (Appeals) had denied modvat credit based on a misinterpretation of the law, attempting to reclassify items based on Note 2 to Section XVI. However, it was established that once sellers classify products without dispute, reclassification at the recipient end is impermissible. Precedents cited by the advocate favored the assessee on this matter, leading to the conclusion that the impugned order was incorrect and should be set aside.

In the final judgment, the Tribunal allowed the appeal filed by the assessee, granting consequential relief, and rejected the Revenue's appeal. The decision was made in accordance with the division bench rulings cited by the advocate, emphasizing the correctness of setting aside the erroneous order.