2005 (2) TMI 386 - AT - Central Excise

Summary

Issues involved: Appeal against the order of the Commissioner of Central Excise Vapi regarding entitlement to Modvat Credit and imposition of penalty.

Entitlement to Modvat Credit: The appellant paid duty on galvanized CRCA Strips, taking Modvat credit of duty paid on the strips. Initially, the Department accepted this payment, considering galvanization as manufacturing. Subsequently, it was determined that galvanization did not amount to manufacture, leading to a denial of duty payment on galvanized strips. The Commissioner held that the appellant was not entitled to Modvat Credit on the duty paid for the inputs used in manufacturing the non-excisable final product. A penalty of Rs. 5,000 was also imposed.

Legal Precedents: The Tribunal referred to previous cases where it was established that an assessee is entitled to take Modvat/Cenvat Credit of duty paid on inputs used in manufacturing the final dutiable product, even if the final product was later deemed non-dutiable. Reversal of credit cannot be ordered in such cases, especially when the Department had accepted duty on the allegedly non-dutiable goods. The Tribunal cited cases like PSL Holdings Ltd. v. Commissioner of Central Excise, Rajkot and Vinayak Industries v. CCE Rajkot to support this view.

Judgment: After hearing both sides, the Tribunal allowed the appeal, setting aside the Commissioner's order. The Tribunal emphasized that denial of Modvat Credit for duty paid on inputs used in manufacturing non-dutiable goods, for which duty was paid, was not justified. The decision was in line with established legal principles and precedents, leading to the reversal of the Commissioner's order and the penalty imposed.

(Operative part pronounced in Court)