2014 (2) TMI 1052 - AT - Central Excise

Disallowance of MODVAT Credit - Credit on hydraulic jack, ammonia paper and parts of locomotive - Held that - in respect of hydraulic jack which is an item supplied with power transformers. It is used for lifting of the transformer tank, in order to move it on rails for changing oil in the event of short circuit fault. It is necessarily supplied against each order for transformer - assessee is entitled to avail the Modvat credit, in respect of excise duty paid on kits. In Daewoo Motors India Ltd. 2000 (6) TMI 96 - CEGAT, COURT NO. I, NEW DELHI this Tribunal was considering whether the value of tool kits is to be incorporated in the assessable value of the motor vehicle - No infirmity in the order-in-appeal passed by the Commissioner of Central Excise (Appeals) - Following decision of BAJAJ AUTO LIMITED Versus COLLECTOR OF CENTRAL EXCISE, PUNE 1996 (10) TMI 117 - CEGAT, NEW DELHI - Decided against Revenue.

Summary

Issues:
1. Admissibility of Modvat credit on hydraulic jack, ammonia paper, and parts of locomotive.
2. Interpretation of relevant legal provisions under Central Excise Rules.
3. Application of precedents in determining credit eligibility.
4. Assessment of the essentiality of hydraulic jack in the manufacturing process.

Analysis:
1. The case involved a dispute regarding the admissibility of Modvat credit amounting to Rs. 7,07,041/- on items like hydraulic jack, ammonia paper, and parts of locomotive by a manufacturer of electrical goods. The department contended that the credit was not admissible and issued a show cause notice for disallowance under Rule 57-I of the Central Excise Rules, imposing a penalty as well. The initial order-in-original denied the credit, leading to subsequent appeals by the respondent challenging the decision.

2. The Commissioner of Central Excise (Appeals) rejected the appeal based on non-compliance with statutory provisions. However, a later appeal to the Tribunal resulted in a remand to the Commissioner (Appeals) for a merit-based hearing, which ultimately led to the allowance of the appeal by the respondent. Consequently, the Revenue filed an appeal against this decision, leading to the current proceedings before the Appellate Tribunal CESTAT NEW DELHI.

3. The arguments presented by the parties revolved around the interpretation of legal precedents such as the decision in Bajaj Auto Limited v. CCE and Daewoo Motors India Ltd. v. CCE, which had conflicting views on the eligibility of certain credits. The Revenue contended that the Commissioner (Appeals) erred in relying on the Bajaj Auto Ltd. decision and highlighted a different perspective presented in the Daewoo Motors case and a judgment by the Patna High Court.

4. The final judgment focused on the essentiality of the hydraulic jack in the manufacturing process of transformers, emphasizing its role in lifting transformer tanks for maintenance purposes. The Tribunal upheld the decision of the Commissioner (Appeals) based on the precedent set by the Larger Bench in Bajaj Auto Ltd., affirming the right of the assessee to avail Modvat credit for excise duty paid on essential items like hydraulic jacks. The Tribunal found no fault in the Commissioner's decision and rejected the Revenue's appeal, concluding the case in favor of the respondent.