2002 (12) TMI 156 - AT - Central Excise

Summary

Issues:
Availability of Modvat credit on 'Die Casting Machines'; Denial of credit based on exemption of final product from duty and delay in filing declaration under Rule 57T.

Analysis:
The dispute in the present appeal revolves around the availability of Modvat credit on two 'Die Casting Machines' installed by the appellants in their factory. The denial of credit amounting to about Rs. 13 lakhs and imposition of an equal penalty on the appellants is based on two grounds. Firstly, it is contended that the machines were used in the manufacture of a final product exempted from excise duty. Secondly, it is argued that a declaration under Rule 57T was not filed within the stipulated time for one of the machines.

The appellants challenge the denial of credit both on merit and on the ground of limitation. They assert that the machines were used for manufacturing castings that were not exempted, but rather sent without duty payment for further manufacture under Rule 57F(3). The appellants also claim that even if goods cleared under Rule 57F(3) are considered exempted, the Modvat credit should still be available due to payment of duty on other goods. They highlight that Rule 57R(1) prohibits credit only for 'capital goods' exclusively used for producing exempted goods, not for those partly used for exempted and dutiable goods.

Regarding the delay in filing the declaration under Rule 57T, the appellants argue that the delay was condoned by the Assistant Commissioner within the permissible three-month limit. They emphasize that the declaration was filed within the timeframe supported by the 'Goods Receipt Note' in their records, which detailed the machine's receipt in the factory. The appellants also reference a previous Tribunal decision stating that credit cannot be denied for failure to file a declaration.

The learned SDR contends that credit availability must adhere to the rules, and production reports showing machine use on 18-11-95 indicate a delay in the declaration beyond permitted time. It is suggested that the delay condonation was obtained through misrepresentation of the machine's receipt date.

The Tribunal finds that the denial of credit based on the machines' use in producing exempted goods is erroneous. The machines were used for both exempted and dutiable goods, and partial use for exempted goods does not bar credit under Rule 57R. The order is deemed incorrect in disallowing credit based on exempted goods production. Additionally, the delay in declaration is found to be condoned by the Assistant Commissioner, supported by the Goods Receipt Note. The impugned order is held unsustainable for not considering the Goods Receipt Note and for disregarding the Tribunal's precedent on credit denial for declaration failure.

Consequently, the appeal is allowed in favor of the appellants with consequential relief granted.