2022 (9) TMI 740 - SC - Central Excise

MODVAT Credit - Capital goods - Guide Car - classifiable under Chapter subheading 8603.00 or under Chapter sub-heading 8428.90 of the Central Excise Tariff Act, 1985 or not - whether the appellant is entitled to Modvat credit under Rule 57Q of the Rules 1944 on Guide Cars treating the same as components of Coke Oven Battery, as claimed? HELD THAT - The test would be whether the Guide Car can be said to be an integral part necessary to the constitution of the whole article, namely, Coke Oven Battery and whether without it, the Coke Oven Battery shall not be complete? Considering the process and the manner in which and/or for the purpose for which the Guide Car is used, by no stretch of imagination, it can be said to be a component of Coke Oven Battery. It cannot be said that without the Guide Car the Coke Oven Battery shall not be functional. The Guide Car is being used for the purpose of transporting the hot coke after it is processed in the Coke Oven Battery. Therefore, Guide Car can be said to be a different equipment distinct from the Coke Oven Battery and cannot be considered to be a part of the Coke Oven Battery. In that view of the matter, the appellant shall not be entitled to the Modvat credit on Guide Car as component and/or part of Coke Oven Battery as claimed by the appellant. The Adjudicating Authority as well as the learned Tribunal have rightly confirmed the demand of Modvat credit availed by the appellant on Guide Cars . Levy of penalty - HELD THAT - The penalty was not justified at all. The appellant bonafidely believed that the goods would fall under Chapter sub-heading 8428.90 and/or that the Guide Car can be said to be a component of the Coke Oven Battery. Therefore, the order of penalty of Rs.1,00,000/- imposed by the Tribunal is required to be quashed and set aside. Whether classification of the Guide Car under Chapter sub-heading 8603.00 shall be applicable prospectively and shall not be applicable retrospectively with respect to supply in the month of November, 1999? - HELD THAT - It is required to be noted that it was a case of self-assessment by the supplier and the supplier classified the Guide Car under Chapter subheading 8428.90, though it was classifiable under Chapter sub-heading 8603.00. That thereafter the appropriate authority classified the Guide Car under Chapter sub-heading 8603.00. Therefore, it will relate back to the original claim and/or relate back to the date of supply/selfassessment. The present appeal with respect to Modvat credit claimed by the appellant on Guide Car is hereby dismissed. The Adjudicating Authority as well as the learned Tribunal have rightly denied the Modvat credit to the appellant on Guide Car . The learned Tribunal has rightly confirmed the demand of Rs. 45,86,664/- being the Modvat credit availed by the appellant on Guide Car - Appeal dismissed.

Summary

Issues Involved:
1. Classification of 'Guide Car' under the Central Excise Tariff Act.
2. Eligibility for Modvat credit on 'Guide Car' as a component of Coke Oven Battery.
3. Applicability of penalty for wrongly availing Modvat credit.
4. Retrospective application of classification of 'Guide Car'.

Detailed Analysis:

1. Classification of 'Guide Car':
The primary dispute revolves around the classification of 'Guide Car' under the Central Excise Tariff Act. Initially, the appellant classified 'Guide Car' under Chapter sub-heading 8428.90, while the Adjudicating Authority and Tribunal classified it under Chapter sub-heading 8603.00. It is established that classification at the consignor's end is final and cannot be questioned at the consignee's end. Therefore, 'Guide Car' is to be classified under Chapter sub-heading 8603.00.

2. Eligibility for Modvat Credit:
The appellant claimed Modvat credit under Rule 57Q of the Central Excise Rules, 1944, arguing that 'Guide Car' should be treated as a component of Coke Oven Battery. Rule 57Q allows credit for capital goods used by the manufacturer, and the appellant argued that 'Guide Car' falls under serial No. 5 of the Table, which includes components, spares, and accessories of specified goods. The court examined whether 'Guide Car' is an integral part necessary for the constitution of Coke Oven Battery. It was determined that 'Guide Car' is used for transporting hot coke and is distinct from Coke Oven Battery. Thus, it cannot be considered a component, and the appellant is not entitled to Modvat credit on 'Guide Car'.

3. Applicability of Penalty:
The Tribunal imposed a penalty of Rs. 1,00,000/- on the appellant for wrongly availing Modvat credit. However, the court found that the appellant bonafidely believed that 'Guide Car' fell under Chapter sub-heading 8428.90 and could be considered a component of Coke Oven Battery. Given the absence of suppression or mala fide intention, the penalty was deemed unjustified and was quashed.

4. Retrospective Application of Classification:
The appellant argued that the classification of 'Guide Car' under Chapter sub-heading 8603.00 should not apply retrospectively to the supply made in November 1999. The court noted that the supplier initially classified 'Guide Car' under Chapter sub-heading 8428.90, but it was later correctly classified under Chapter sub-heading 8603.00 by the appropriate authority. This classification relates back to the original claim date. The reliance on the decision in Cotspun Limited was found inapplicable, as it dealt with an approved classification list corrected subsequently, which was not the case here.

Conclusion:
The appeal regarding Modvat credit on 'Guide Car' was dismissed, upholding the demand of Rs. 45,86,664/-. However, the penalty of Rs. 1,00,000/- was quashed. The decision emphasized the finality of classification at the consignor's end and clarified the non-eligibility of 'Guide Car' as a component of Coke Oven Battery for Modvat credit.