1997 (6) TMI 214 - AT - Central Excise

Summary

Issues:
Challenge to duty demand and penalty based on the limitation period for show cause notice.

Analysis:
The appeal challenged the duty demand of Rs. 72,927 on Steel tubes and a penalty of Rs. 10,000 confirmed by the Commissioner (Appeals). The main argument was that the show cause notice issued on 25-1-1995 was beyond the limitation period of six months as it related to credit taken by the appellants on 29-6-1994. The contention was that since the show cause notice was not tenable, the subsequent orders confirming the demand were also not maintainable.

The appellants, manufacturers of chemicals, had received steel tubes for their distillation column, claiming them as essential machinery for manufacturing. The Department alleged that the steel tubes did not qualify as 'capital goods' for Modvat credit. The Assistant Commissioner held that the tubes did not satisfy the conditions of 'plant' as required for capital goods. The Commissioner (Appeals) emphasized that the onus was on the assessee to prove that the steel tubes were specifically designed to be fitted with the main plant and machinery, which the appellants failed to do.

The Representative of the appellants argued that the steel tubes were part of the distillation column machinery, falling under the definition of capital goods. Referring to Rule 57Q and a circular by the Central Board of Excise & Customs, it was contended that the steel tubes were eligible for credit as specified goods. The Departmental Representative reiterated the failure of the appellants to establish the steel tubes as components for the distillation column.

The Tribunal considered the contentions and held that the show cause notice was barred by limitation as the appellants had taken credit for the steel tubes on 29-6-1994, and the Department failed to verify their subsequent utilization. It was concluded that the appellants were not liable for misstatement, and the extended period of limitation was unjustified. Consequently, the appeal was allowed, the impugned order was set aside, and the penalty imposed was also revoked since the show cause notice itself was not maintainable.