2003 (10) TMI 158 - AT - Central Excise

Summary

Issues Involved:
1. Denial of Modvat credit to Appellant No. 1.
2. Imposition of penalties on Appellant No. 1, Appellant No. 2, and Appellant No. 3.

Detailed Analysis:

1. Denial of Modvat Credit to Appellant No. 1:

The primary issue revolves around whether Appellant No. 1 was rightfully denied Modvat credit on the Colour Picture Tubes (CPTs) they sent for repair to Appellants 2 and 3. The denial was based on two grounds: the absence of identification marks/serial numbers on the CPTs in the 57F(3)/(4) challans, and the allegation that Appellants 2 and 3 did not repair the CPTs but replaced them with new ones without paying duty.

The Tribunal found no tangible evidence to support these grounds. It was undisputed that Appellant No. 1 initially received the CPTs on payment of duty and was entitled to Modvat credit. The defective CPTs were sent for repair under proper challans, and credit was reversed accordingly. The mere lapse of not mentioning identification marks did not substantiate the claim that no CPTs were sent for repair. Furthermore, there was no evidence proving that Appellant No. 1 received new CPTs instead of repaired ones.

2. Imposition of Penalties:

Penalties were imposed on Appellants 2 and 3 based on the allegation that they cleared new CPTs in the guise of repaired ones without paying duty, thus aiding Appellant No. 1 in availing wrongful Modvat credit. However, the Tribunal found no convincing evidence to support these allegations. The initial receipt of CPTs by Appellant No. 1 from Appellants 2 and 3 was undisputed, and the procedure followed for sending defective CPTs for repair was duly documented.

The Tribunal noted that previous show cause notices issued on similar allegations were dropped by the Collector of Central Excise, and this decision was upheld by the Tribunal. The Tribunal also emphasized that no duty demand was raised against Appellants 2 and 3 for allegedly clearing new CPTs without payment of duty.

Conclusion:

The Tribunal concluded that the allegations against the appellants were not substantiated by evidence. The mere absence of identification marks on the challans did not prove that the CPTs were not sent for repair. The previous decisions dropping similar allegations further weakened the department's case. Consequently, the Tribunal set aside the impugned order-in-original, allowing the appeals of all appellants with consequential relief, if any, permissible under the law.