2007 (10) TMI 36 - AT - Customs

Credit on imported components and parts of a turbine generators which were to be assembled and installed in the Captive Power Plant Impugned goods still lying in the factory Credit can not be denied on assumption and presumption that appellant had no intention to use impugned components

Summary

Issues:
1. Eligibility of Cenvat credit on imported capital goods for captive power plant.
2. Interpretation of Rule 57Q of Central Excise Rules, 1944.
3. Disallowance of credit, penalty imposition, and interest recovery.

Analysis:

Issue 1:
The appellant obtained EPCG licenses for importing capital goods for a captive power plant but faced allegations of not intending to install the plant in their factory premises. The department issued a show cause notice for denial of credit, penalty imposition, and interest recovery. The appellant contended that they had procured indigenous materials for the power plant and faced obstacles from the Pollution Control Board. The adjudicating authority concluded that the appellant had no intention to install the power plant on their premises, leading to the denial of credit and confiscation of goods. The appellate tribunal found the order unsustainable, noting the appellant's investment in machinery and environmental clearance efforts, and overturned the decision.

Issue 2:
The tribunal analyzed Rule 57Q of the Central Excise Rules, 1944, which governs the credit on capital goods. The appellant imported turbine components for the power plant, falling under Rule 57Q(7). The tribunal agreed with the appellant's counsel that they were eligible for 100% credit based on the rule's provisions. The tribunal highlighted that the lower authorities had acted without concrete evidence, emphasizing the appellant's right to avail Cenvat/Modvat credit on the imported components.

Issue 3:
The department contended that the appellant availed credit for goods not intended for their factory premises, citing amendments to include another company in the licenses. However, the tribunal found the department's arguments weak, emphasizing the appellant's intentions based on their actions and investments. The tribunal criticized the lower authorities for passing the order on presumptions and surmises, leading to the decision's overturning and granting relief to the appellant.

In conclusion, the appellate tribunal found in favor of the appellant, allowing the appeal and setting aside the unsustainable order. The judgment emphasized the appellant's eligibility for credit based on Rule 57Q provisions and criticized the department's weak arguments and reliance on assumptions.