2002 (3) TMI 163 - AT - Central Excise

Summary

Issues:
- Disallowance of Modvat credits under Rule 57A/57Q
- Denial of credits on capital goods, Boric Acid, HR Sheets, and Pig Iron
- Denial of credit taken beyond the prescribed period
- Imposition of penalty under Rule 173Q

Analysis:
1. The appeal challenged the disallowance of Modvat credits by the Commissioner for the period October 1997 to May 1999, totaling Rs. 3,41,007.52, along with a penalty of Rs. 15,000. The denial of credits on various grounds was examined, including Rs. 1,23,061 on capital goods, Rs. 42,901 on Boric Acid, Rs. 1,62,236 on HR Sheets, Rs. 8,666 taken beyond the prescribed period, and Rs. 4,143 on Pig Iron.

2. The Commissioner disallowed the credit of Rs. 1,23,061 on capital goods based on the assumption that the appellants were under the Compounded Levy Scheme. However, it was found that the appellants were not covered under this scheme during August 1997, making the denial unsustainable in law. The credit was held admissible.

3. The credit on Boric Acid was deemed eligible under Rule 57A as it was used in manufacturing processes. Similarly, the credit on HR Sheets, used in the induction furnace, was considered admissible as they became part of the final product, supporting the manufacturing process.

4. The credit of Rs. 8,666 taken on goods supplied by HPCL was denied for being beyond the prescribed six-month period. However, it was argued that the challan issued at the time of supply should be considered the duty-paying document, making the credit admissible. The denial was found incorrect.

5. The credit of Rs. 4,143 on Pig Iron was disallowed due to higher duty paid by the manufacturers. However, the authorities lacked the power to recover the credit without following the due procedure under Rule 57E. As no such proceedings were initiated, the credit was deemed allowable.

6. The penalty of Rs. 15,000 was imposed under Rule 173Q, which was set aside considering the majority of Modvat credits were found to be admissible. Only a small portion of the credit was deemed inadmissible. The appeal was allowed in part, overturning the penalty.