2005 (12) TMI 178 - AT - Central Excise

Summary

Issues:
1. Challenge to the demand for Modvat/Cenvat credit on damaged or lost goods not used in final product manufacture.
2. Imposition of penalties and interest under relevant sections of the Central Excise Rules.
3. Dispute over the time-limit for the use of capital goods or inputs.
4. Applicability of previous case laws and rulings in similar matters.
5. Refund of the amount deposited in the Cenvat account.

Analysis:
1. The appeal challenged the demand for Modvat/Cenvat credit on goods damaged or lost during transit, storage, or other incidents, which were not utilized in the manufacture of final products. The appellants argued that since the damaged goods were still within the factory premises and claimed insurance for them, there should be no duty liability on them. They relied on the absence of a time-limit for using capital goods or inputs and cited case laws like Bharat Heavy Electricals Ltd. v. CCE, Bangalore to support their position.

2. The Adjudicating Authority had imposed penalties and demanded interest under relevant sections of the Central Excise Rules. The appellants contested these penalties, stating that there was no mala fide intention, and therefore, penalties were not justified. The Tribunal found that the demand for duty on the credit taken was premature in cases where damaged goods could still be repaired and used in manufacturing final products. Consequently, the Order-in-Original was set aside, and the appeal was allowed with consequential relief.

3. The dispute over the time-limit for the use of capital goods or inputs was addressed by the appellants, arguing that duty liability arises only upon removal from the factory. They emphasized that the demand made was not correct in law based on this understanding of the Central Excise Law.

4. The appellants also referred to various rulings such as CCE, Indore v. Kinetic Motors Co. Ltd., M/s. Jindal Polyster Ltd., Gulaothi v. CCE, Meerut, Ashok Leyland Ltd. v. CCE, Chennai, and CCE, Chennai-III v. Indchem Electronics to support their case regarding the denial of Modvat credit on damaged goods within the factory premises.

5. Additionally, the appellants highlighted the amount of Rs. 7,54,753/- deposited in the Cenvat account at the insistence of the Department, which was neither demanded nor appropriated in the impugned order. They requested a refund of this amount, indicating a separate issue for consideration by the Tribunal.