2008 (7) TMI 428 - HC - Central Excise

Can the Tribunal allow the modvat credit on grinding media balls of SH. 6907 & 7325.20 under rule 57A during the period from 24-4-1992 to 16-6-1994. When it is excluded from Rule 57A and is not an input for manufacture of final product i.e. Cement? Held that - Since the whole edifice of reference petition is sought to rest on provisions of Rule 57A, as are shown to have come into existence since 1-3-1997, and not on the provisions of Rule 57A as are shown to have existed at the relevant time, and since according to the provisions of Rule 57A as they are shown to have existed at the relevant time, on the face of language thereof, since the grinding media balls are eligible for availing Modvat credit, it cannot be said, that the substantial question of law, as raised, arises in the present case, nor that any interference is required to be made in the orders of the learned authorities below. W.P. dismissed.

Issues Involved:
1. Eligibility of Modvat credit on grinding media balls under Rule 57A.
2. Requirement and impact of filing a proper declaration under Rule 57G.

Detailed Analysis:

1. Eligibility of Modvat Credit on Grinding Media Balls under Rule 57A:

The primary issue revolves around whether grinding media balls fall under the definition of "inputs" eligible for Modvat credit as per Rule 57A during the period from 24-4-1992 to 16-6-1994. The Revenue contended that grinding media balls are excluded from Rule 57A as they are part of equipment, apparatus, tools, or appliances used in manufacturing, and thus not inputs.

The court analyzed the provisions of Rule 57A as they existed at the relevant time, which allowed credit for excise duty paid on goods used in or in relation to the manufacture of final products, whether directly or indirectly. The exclusion clause in Rule 57A excluded machines, machinery, plant, equipment, apparatus, tools, appliances, or capital goods, except those used as component parts in the manufacture of final products.

The court found that grinding media balls, being component parts used in the manufacturing process, fall within the definition of inputs eligible for Modvat credit. This conclusion was supported by the language of Rule 57A at the relevant time, which explicitly included component parts within the definition of inputs.

2. Requirement and Impact of Filing a Proper Declaration under Rule 57G:

The second issue dealt with the requirement of filing a proper declaration under Rule 57G and whether the failure to do so could disqualify the assessee from availing Modvat credit. The Revenue argued that the assessee had not filed the necessary declaration for the grinding media balls, and thus, Modvat credit should be denied.

The court noted that the learned Assistant Commissioner had regularized the default in submitting the declaration by imposing a penalty of Rs. 10,000/- under Rule 173Q(bb) for contravention of Rule 57G(l). The Revenue had raised this issue before the Commissioner (Appeals), but it was not pressed during the hearing, nor was it a ground in the appeal before the Tribunal.

Given that the issue of non-filing of the declaration was not actively pursued by the Revenue in subsequent appeals, the court concluded that it was too late to deny Modvat credit on this ground. The penalty imposed by the Assistant Commissioner was deemed sufficient to regularize the procedural lapse.

Conclusion:

The court dismissed the reference petition, affirming that grinding media balls are eligible for Modvat credit under Rule 57A as they are component parts used in the manufacturing process. Additionally, the procedural lapse of not filing a declaration under Rule 57G was adequately addressed by the penalty imposed, and thus, Modvat credit could not be denied on this basis. The judgment reinforced the principle that minor procedural lapses should not result in the denial of substantive benefits like Modvat credit.

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