2000 (3) TMI 119 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of various machines and equipment for Modvat credit u/r 57Q.
2. Denial of Modvat credit on specific items like HMT milling machine, high-speed precision lathe, EPBAX system, crane, lighting fittings, air conditioner, M.S. angles, channels, shapes, sections, and cement.
3. Imposition of penalty on the assessee.

Summary:

1. Eligibility of Various Machines and Equipment for Modvat Credit u/r 57Q:
The appellants argued that the items on which credit was denied were admissible inputs as per several judgments. The Commissioner believed that only machinery directly involved in production or processing qualified for credit, relying on judgments like TELCO v. CCE and Shanmughraj Spinning Mills Pvt. Ltd. However, the Tribunal found that the definition of capital goods was extensive and did not require direct participation in production. Citing judgments like Jawahar Mills Ltd., the Tribunal allowed credit for auxiliary equipment like wires, cables, and electric panels.

2. Denial of Modvat Credit on Specific Items:
- HMT Milling Machine and High-Speed Precision Lathe: The Commissioner denied credit as these were used for repairing machinery, not in the manufacture of pig iron. The Tribunal upheld this denial.
- EPBAX System: Denied as it was a general communication device, not used for producing or processing excisable goods. The Tribunal upheld this denial.
- Crane: Credit was denied due to lack of duty-paying documents. The Tribunal remanded the issue to the Commissioner for reconsideration upon submission of documents.
- Lighting Fittings: Denied as they did not meet the requirement of being used in production or processing. The Tribunal upheld this denial.
- Air Conditioner: Denied as it was used for peripheral purposes, not directly in production. The Tribunal upheld this denial.
- M.S. Angles, Channels, Shapes, Sections, and Cement: Denied as they were used for construction of the plant, not directly in production. The Tribunal upheld this denial, citing judgments like Malvika Steel Ltd. and J.K. Cotton Spinning and Weaving Mills Co. Ltd.

3. Imposition of Penalty:
The Commissioner imposed a penalty of Rs. 10 lakhs, citing the Supreme Court's dictum that penalty is a civil obligation in tax delinquency cases. However, the Tribunal found that the imposition of penalty was not warranted as the assessee had a firm belief in the eligibility of the benefits claimed and there was no prior denial of such benefits. The penalty was remitted in full.

Conclusion:
(i) Orders of reversal of credit/confirmation taken on cement, steel, shapes, rounds, channels, EPBAX system, and lighting fittings are upheld.
(ii) Credit of duty taken on all other inputs is permitted.
(iii) The issue of the crane is remanded to the Commissioner for reconsideration.
(iv) The assessee is permitted to address the arithmetical mistake amounting to Rs. 6,804/-.
(v) The penalty of Rs. 10 lakhs is remitted in full.
(vi) The matter is remanded to the Commissioner for issues (iii) and (iv).

The appeal is disposed of in these terms.