2003 (4) TMI 199 - AT - Central Excise

Summary

Issues:
- Denial of Modvat credit on hydrogen and chlorine gas cylinders
- Denial of Modvat credit on maleic resins, magnafloc, clean flo, and synthetic gums
- Imposition of penalty and interest

Analysis:
1. The appellants contested the denial of Modvat credit on hydrogen and chlorine gas cylinders by the Commissioner of Central Excise, Kolkata-III. The appellants argued that the impugned goods qualify as inputs for Modvat credit under Rule 57A, supported by case laws such as Commr. of Cus. & C. Ex., Meerut-I v. Modi Rubber Ltd. The Department, however, opposed the Modvat credit, claiming that the goods were not capital goods and the procedure under Rule 57A was not followed. After reviewing the case records and relevant case laws, the Tribunal found that the gas cylinders were not utilized for production or processing but only for storage and transfer of gas. Despite citing precedents where Modvat credit was allowed on similar items, the Tribunal noted that the specific tariff headings at the time did not include these cylinders as capital goods, leading to the rejection of Modvat credit on hydrogen and chlorine gas cylinders.

2. Regarding the denial of Modvat credit on maleic resins, magnafloc, clean flo, and synthetic gums, the Department argued that these items were not capital goods. The appellants admitted the error of recording these items as capital goods but rectified the mistake. Citing the decision in the case of Modi Rubber Ltd., the appellants contended that the declaration under Rule 57Q sufficed for extending credit even if mistakenly recorded as capital goods. Relying on this and other supportive precedents, the Tribunal allowed Modvat credit on these items, considering the rectification made by the appellants.

3. The imposition of a penalty and interest was also challenged by the appellants, arguing against the justification of the amounts imposed. The Tribunal, after considering the circumstances, reduced the penalty amount from Rs. 4,87,376/- plus Rs. 13,32,793/- to Rs. 1 Lakh. The appeal was partly allowed in favor of the appellants, with the Tribunal modifying the penalty amount accordingly.