2004 (7) TMI 135 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on electric cables used partially within the factory premises.

Analysis:
The case involved the denial of Modvat credit on electric cables used by the assessee, where only a portion of the cables were utilized within the factory premises. The Assessee procured 3,926 meters of cables and availed Cenvat credit during a specific period. The dispute arose as the assessee claimed credit for the entire length of cables, even though only a small portion was used within the factory. The Deputy Commissioner disallowed the credit, imposed recovery with interest, and imposed a penalty under the Cenvat Credit Rules. The Commissioner of Central Excise (Appeals) upheld the decision, leading to the appeal by the assessee.

The appellant contended that the authorities misapplied previous decisions where Modvat credit was allowed in similar cases. They argued that the cables were a continuous length, with one end inside the factory, and the other end being an extension used inside the factory. The appellant claimed that the denial of credit was against established Tribunal decisions. However, the JDR supported the authorities' decision.

The Deputy Commissioner distinguished the case from previous decisions where Modvat credit was allowed for items used partially outside the factory premises. The comparison was made with cases involving PVC pipes, conveyor belts, and rope ways used for transportation. The Larger Bench decision clarified the definition of the factory and explained the use of capital goods in the manufacturing process. The decision emphasized that the materials must be brought together in the factory for the manufacturing process to commence.

In light of the Larger Bench decision, the appellant's relied-upon cases were deemed irrelevant. The appeal was dismissed based on the findings that the appellant's arguments did not have merit. The appellant also argued against the penalty, citing cases where penalties were not imposed for misinterpretation of statutory provisions. The penalty was set aside, and the appeal was disposed of accordingly, with the denial of Modvat credit upheld but the penalty being waived.