2001 (9) TMI 465 - AT - Central Excise

Summary

Issues: Classification of imported goods under Rule 57Q, denial of Modvat credit, interpretation of Rule 57Q(7), applicability of judgments on classification of goods, availability of Modvat credit on parts, procedural aspects of claiming benefit under Rule 57A.

In the present case, the appellant imported an automatic painting machine in CKD form, which was classified as a complete machine under heading 84.24 based on Interpretative Note 2A of the tariff rules. The appellant also acquired other machines falling under the same heading, manufactured in India and fully assembled. The issue arose when a show cause notice sought reversal of Modvat credit taken by the appellant on the ground that the goods did not meet the criteria under Rule 57Q(7) at the time of receipt in the factory. The Dy. Commissioner upheld the duty and penalty, relying on a Tribunal judgment, which was later partially remitted by the Commissioner based on a Supreme Court judgment.

Regarding the interpretation of Rule 57Q(7), the appellant argued that the criterion for benefit under the rule is on the use of goods in the factory, not just the point of receipt. However, the Tribunal observed that the phrase "use in the factory" describes the inputs and does not suggest admission, as seen in Rule 57A as well. The rule in force at the time of import stated that credit on capital goods received in the factory should not be taken before installation or use for manufacturing export goods.

The appellant further contended that the automatic painting machine, imported as component parts, should be considered under Rule 57A as "inputs." The appellant relied on judgments supporting the claim that even if goods were classified as complete machines for customs purposes, the benefit under the Modvat Scheme for parts could not be denied. The Tribunal referred to various judgments, including those related to car components, motorcycles, and fax machines, to support this interpretation.

In analyzing the procedural aspects of claiming the benefit under Rule 57A, the Tribunal referred to previous judgments approving the sufficiency of the declaration filed by the assessee for claiming credit on specific items like glass bottles. The Tribunal clarified that the benefit under Rule 57A would be limited to machines imported in CKD condition and would not extend to locally acquired machines.

Ultimately, the appeal was partly allowed, granting the benefit of additional customs duty paid on imported machines as credit under Rule 57A while upholding the denial of credit on indigenously acquired machines. The judgment emphasized the importance of correctly interpreting the rules and ensuring compliance with procedural requirements for claiming benefits under the relevant provisions.