2004 (11) TMI 239 - AT - Central Excise

Cenvat/Modvat - Inputs used in the production of machine parts - Demand - benefit of Notification No. 67/95 - expression final products - Invocation of larger period of limitation - Suppression of facts - HELD THAT - The issue of limitation is concerned, we observe that the appellant had been disclosing the fact that he was availing of the benefit of Notification No. 67/95 as reflected in the RT-12 indicating the inputs and the final products. Thus, larger period of limitation cannot be invoked. However, a part of the demand is raised within the normal period (March, 2000). The Commissioner justifies invocation of larger period. We have perused paras 21 and 22 referred to by the Commissioner but we do not find anything that suggests that the appellant suppressed any facts. We observe that the machine parts on which exemption under Notification No. 67/95 is availed were used in the maintenance of capital goods captively. The capital goods in turn were used in or in relation to manufacture of final products i.e. motor vehicles/parts which are dutiable. The Supreme Court in the case of Escort Ltd. v. CCE, 2004 (8) TMI 106 - SUPREME COURT has decided as to what constitute final product. Thus, applying to the present case even though the Supreme Court was interpreting the provisions of Notification No. 217/86-C.E. We hold that the final products in the present case are motor vehicles/parts and since they are not exempt from payment of duty, the appellant is entitled to take credit of duty paid on the inputs that have gone into the manufacture of intermediate goods (machine parts) which have been captively consumed. The appeal is allowed.

Summary

Issues involved: Eligibility of Modvat credit on inputs used in the production of machine parts, interpretation of Notification No. 67/95, applicability of proviso to Notification No. 67/95, invocation of larger period of limitation, suppression of facts by the appellant.

Eligibility of Modvat credit on inputs: The appellant, a manufacturer of motor vehicles and machine parts, claimed Modvat credit on inputs used in the production of machine parts for maintenance of machinery. The dispute arose regarding the admissibility of this credit as the machine parts were captively consumed and fell under specific chapter headings. The Department contended that the credit on inputs for these machine parts was inadmissible under the proviso to Notification No. 67/95.

Interpretation of Notification No. 67/95: Notification No. 67/95 provided exemption for capital goods and inputs captively consumed within the factory of production. The Department argued that since the appellant enjoyed exemption on final products, Modvat credit on inputs was not available. The issue centered on the definition of "final products" in the notification.

Applicability of proviso to Notification No. 67/95: The Department demanded repayment of Modvat credit, interest under Section 11AB, and imposed a penalty under Section 11AC, citing the proviso to Section 11A(1). The appellant contested the denial of credit, asserting compliance with the notification's provisions.

Invocation of larger period of limitation: The Department invoked a larger period of limitation, alleging suppression of facts by the appellant. The Commissioner justified the extended period based on misrepresentation by the appellant, leading to confusion and hindering a clear understanding.

Suppression of facts by the appellant: The issue of suppression of facts by the appellant was examined, with the Tribunal finding no evidence to support the Department's claim. The appellant had consistently disclosed availing benefits under Notification No. 67/95, as reflected in the RT-12 filings.

Decision: The Tribunal held that the appellant was entitled to take credit of duty paid on inputs used in the manufacture of machine parts, which were captively consumed in the maintenance of capital goods. Citing a Supreme Court decision, the Tribunal determined that the final products were motor vehicles/parts, not exempt from duty, allowing the appellant to claim the Modvat credit. The appeal was allowed, overturning the Department's denial of credit and penalties.