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2013 (2) TMI 112 - AT - Central ExciseMODVAT Credit on inputs - Solvent 1425 lies in Chapter sub-heading 2710.11 or 2710.14 - disallowance of Credit under Rule 57I(1) and penalty under Rule 173Q(bb) - Held that - This issue is no more res integra as settled in Sarvesh Refractories case (2007 (11) TMI 23 - SUPREME COURT OF INDIA) wherein held that the classification of the capital goods by the manufacturer-supplier cannot be changed in the hands of the user-manufacturer. In the present case, as the input was classified under Chapter sub-heading 2710.11, the same cannot be changed to 2710.14, as claimed by the Appellant. The judgement of this Tribunal in Balkrishna Industries case 2013 (1) TMI 324 - CESTAT, NEW DELHI) is inapplicable to the facts of the present case, in view of the fact that there has been change in the definition of input as was in existence in 1997 and now in the provisions of CENVAT Credit Rules, 2002/2004. In the changed definition of input under the CENVAT Credit Rules, 2002/2004, Motor Spirit commonly known as petrol, was excluded from the scope of input, whereas in the definition of input during the relevant period, the goods classified under Chapter Sub-Heading 2710.11 had been excluded from the scope of input. Therefore, Solvent 1425 even if considered as not Motor Spirit and allowed CENVAT Credit to be availed on the same under the CENVAT Credit Rules, 2002/2004, the same cannot be made applicable for the period in dispute, i.e.January to October, 1997, when all goods falling under Chapter Sub-Heading 2710.11 were specifically excluded from the scope of MODVAT Credit - no merit in the arguments of the Appellant - in favour of revenue.
Issues:
Admissibility of MODVAT Credit on inputs; Correct classification of input Solvent 1425 under Central Excise Rules, 1944. Analysis: The Appeal was filed by M/s. Tyre Corporation of India Ltd. against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals) regarding the admissibility of MODVAT Credit on inputs. The Department raised objections on the credit availed by the Appellant on various inputs during a specific period. A show cause-cum-demand notice was issued, demanding MODVAT Credit and imposing penalties. The Additional Commissioner disallowed a certain amount of MODVAT Credit and imposed a penalty under the Central Excise Rules, 1944. The Appellant then appealed before the Commissioner of Central Excise (Appeals), who disallowed a portion of the credit on a specific input, Solvent 1425, and reduced the penalty. The Appellant argued that Solvent 1425 was incorrectly classified by the input supplier, which led to the denial of MODVAT Credit. They cited judgments to support their claim that wrong classification should not be a ground for denying credit. On the other hand, the Revenue argued that the classification of the input cannot be altered by the user, referring to relevant judgments by CESTAT and the Supreme Court. The Tribunal reviewed the submissions and records, noting the reduction in the demand amount. The main dispute was the admissibility of MODVAT Credit on Solvent 1425, classified under a specific sub-heading. The Tribunal referenced the Supreme Court's decision in a similar case, emphasizing that the classification by the manufacturer cannot be changed by the user. They also highlighted the change in the definition of inputs under different rules, excluding certain goods from credit eligibility. Consequently, the Tribunal upheld the Commissioner's order, dismissing the Appeal. In conclusion, the Tribunal's decision focused on the correct classification of the input under the Central Excise Rules, 1944, and the applicability of MODVAT Credit based on the classification during the relevant period. The judgment emphasized the importance of adhering to the classification determined by the manufacturer and the impact of changes in the definition of inputs on credit eligibility.
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