2006 (5) TMI 564 - AT - Central Excise

Summary

Issues:
- Modvat credit on Capital Goods used in production of exempted goods
- Removal of used Capital Goods to sister unit
- Demand of duty and penalty

Modvat Credit on Capital Goods:
The appellants received inputs and did job work under Notification No. 214/86-CE. The Revenue contended that Capital Goods were used exclusively for exempted goods production, denying Modvat credit. The appellants challenged this, citing precedents like Bajaj Electricals Ltd. v. CCE and Sterlite Industries (I) Ltd. v. CCE. The Tribunal found that until 30.09.2002, goods were cleared under job work procedure, making Modvat credit denial unjustified. Post that date, goods were cleared on duty payment, indicating non-exclusive use for exempted goods production. The Tribunal referenced Madura Coats Pvt. Ltd. v. CCE to support clearance of used Capital Goods and Sterlite Industries case to establish goods cleared by job workers under Notification 214/86 as non-exempted. Consequently, the Tribunal ruled in favor of the appellants, allowing the appeals and rejecting the demand for Modvat credit and penalty.

Removal of Used Capital Goods:
The Revenue alleged removal of used Capital Goods to a sister unit, leading to duty demand and penalty imposition. The appellants argued against this, emphasizing legal precedents like Madura Coats Pvt. Ltd. v. CCE. The Tribunal, considering the arguments and precedents, concluded that the clearance of used Capital Goods was permissible, aligning with the decision in Madura Coats Pvt. Ltd. case. Therefore, the Tribunal dismissed the demand related to the removal of used Capital Goods and the penalty imposed under Rule 26 of the Central Excise Rules.

Demand of Duty and Penalty:
The Revenue demanded duty and imposed penalties on the appellants for alleged violations related to Modvat credit and removal of used Capital Goods. The appellants contested these demands, presenting legal arguments and citing relevant case laws. After careful consideration, the Tribunal found in favor of the appellants, ruling that the demands lacked merit. The Tribunal allowed the appeals, providing consequential relief and absolving the appellants from the duty and penalties imposed.