1994 (11) TMI 215 - AT - Central Excise

Summary

Issues:
1. Availing modvat credit on defective picture tubes used in manufacturing television sets.
2. Validity of imposing penalty along with the duty recovery.

Analysis:
1. The case involved M/s. Monica Electronics Ltd. availing modvat credit on defective picture tubes used in manufacturing television sets. The Central Excise Officers found that the company had taken credit for 305 picture tubes, which were defective and irreparable. A show cause notice was issued proposing the recovery of Rs. 3,05,000/- as duty and imposition of a penalty of Rs. 7,500/-. The appellant argued that the damaged picture tubes should be considered waste arising during the manufacturing process, relying on a previous Tribunal decision in Collector of Central Excise v. Ludhiana Bottling Company [1992 (59) E.L.T. 327]. The Additional Collector of Customs confirmed the duty demand and penalty.

2. The Tribunal analyzed the situation and distinguished it from the Ludhiana Bottling case. It was observed that the picture tubes did not become unusable during the manufacturing of the final product, as they were damaged prior to reaching the manufacturing stage. The Tribunal clarified that the expression "during the course of manufacture" does not include stages before the actual manufacturing operation commences. Therefore, the damaged picture tubes could not be considered waste under Rule 57(b)1, and the credit taken on them had to be reversed. The Tribunal upheld the duty recovery but set aside the penalty as there was no evidence of any wrongdoing or lack of bona fide belief by the appellant. The order did not provide reasons for imposing the penalty under Rule 173Q, leading to its cancellation.

3. In conclusion, the Tribunal confirmed the duty recovery on the defective picture tubes but set aside the penalty imposed by the Additional Collector. The appellant's argument that the damaged tubes should be considered waste during manufacturing was rejected, as the damage occurred before the actual manufacturing process. The Tribunal emphasized that the imposition of a penalty requires evidence of wrongdoing, which was lacking in this case. Therefore, the appeal was disposed of accordingly, with any consequential relief flowing to the appellant.