1999 (7) TMI 446 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on cables and air break contactors.
2. Classification of REDN-O-Type as capital goods.
3. Admissibility of Modvat credit based on Tribunal's judgment.
4. Imposition of penalty.

Analysis:

1. The judgment deals with the denial of Modvat credit amounting to Rs. 2,73,815/- on cables and air break contactors. The denial was based on the argument that these items did not qualify as "capital goods" under Rule 57Q as they were not used in the production process or for processing substances. The appellant contested this denial, citing the Larger Bench decision in the case of Jawahar Mills Ltd. & Ors. v. CCE Coimbatore & Ors., asserting that these items were indeed eligible for Modvat credit.

2. The issue of REDN-O-Type, initially classified as cables by the lower authorities, was raised by the appellant. The appellant argued that REDN-O-Type should be considered as "capital goods" under Rule 57Q due to its nature as a gear type box. The adjudicating authority failed to discuss this specific item, leading to a mistake in the assessment. The judge agreed with the appellant that REDN-O-Type should be re-evaluated for Modvat credit eligibility based on the Tribunal's judgment in the Jawahar Mills case.

3. Regarding the admissibility of Modvat credit, the judge concurred with the appellant's advocate that Modvat credit should be allowed on cables and air break contactors based on the Tribunal's judgment in the Jawahar Mills case. Consequently, the Modvat credit of Rs. 2,73,815/- was reduced by the amount attributed to REDN-O-Type, resulting in a net credit of Rs. 2,57,298/- being granted to the appellant. The judge directed the adjudicating authority to reassess the Modvat credit on REDN-O-Type in light of the judgment.

4. Finally, the judge addressed the question of imposing a penalty. Given that the issue primarily revolved around the interpretation of Rule 57Q and lacked any malicious intent on the part of the appellant, the judge decided not to impose a penalty of Rs. 2,73,815/-, considering it a matter of statutory interpretation rather than deliberate non-compliance. Consequently, the appeal was allowed on the terms discussed, with the appellant receiving the approved Modvat credit and the penalty being set aside.