2004 (10) TMI 241 - AT - Central Excise

Summary

Issues involved: Appeal against recovery of irregular Modvat credit availed on inputs/spares u/s Rule 57-I of Central Excise Rules, interpretation of Board Circular No. 645/36/2002-CX, imposition of penalties on credit availed.

In these 4 appeals, a common question of law and facts arise regarding the recovery of irregular Modvat credit availed by the appellants on inputs/spares u/s Rule 57-I of the Central Excise Rules. The Department initiated proceedings based on the appellants' writing off of the value of inputs/spares at 75% and taking the value at 25% of the average weighted cost. The issue revolves around the interpretation of Board Circular No. 645/36/2002-CX, which clarifies that writing off a partial value of inputs/capital goods does not disentitle the appellants from availing Modvat credit. The Commissioner, however, confirmed the demands and imposed penalties on the credit availed.

The Tribunal considered the precedent set in the case of Bharat Heavy Electricals Ltd. v. CCE, Bangalore, where it was held that writing off the value of inputs in the books of account does not disentitle the appellants from taking the credit. Citing the ruling in the case of Oswal Agro Mills Ltd., the Tribunal emphasized that disallowing Modvat credit based on presumptions of non-usage is unjustified when goods are in the factory premises. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants.

The Tribunal's decision was based on the findings in the case of Bharat Heavy Electricals Ltd., which established that writing off the value of inputs/spares does not prevent the appellants from availing Modvat credit. The issue was deemed to be covered in the appellant's favor, leading to the setting aside of the impugned order and allowing the appeal with any consequential relief. The operative portion of the order was pronounced and dictated in the open court upon completion of the hearing on 19-10-2004.