2004 (5) TMI 412 - AT - Central Excise

Tribunal Allows Appellant to Reclaim Modvat Credit After Disallowance

JCT. ELECTRONICS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, VADODARA

JCT. ELECTRONICS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, VADODARA - 2004 (172) E.L.T. 197 (Tri. - Del.) Issues involved:Eligibility of a company to take back Modvat credit in their books of account after remand by Commissioner (Appeals) to the Adjudicating Authority for re-adjudication.Detailed Analysis:Issue 1: Eligibility to take back Modvat creditThe appellant, a manufacturer of color picture tubes, availed MODVAT Credit for duty paid on inputs and capital goods used in manufacturing. A show cause notice was issued for denial of Modvat Credit on capital goods for a specific period. The Assistant Commissioner disallowed a certain amount of Modvat Credit, which was later partially allowed by the Commissioner (Appeals). The matter was remanded for de novo adjudication in respect of the remaining amount. The appellant informed the Assistant Commissioner and took back the allowed Credit in their RG 23-C register. However, the Deputy Commissioner ordered the recovery of the amount taken as Credit, imposing a penalty. The Commissioner (Appeals) upheld the recovery but set aside the penalty, stating that the appellant should have deferred taking re-credit until the Adjudicating Authority's order.Issue 2: Interpretation of Modvat RulesThe Modvat Credit of duty paid on capital goods was governed by specific rules during the relevant period. One of the key conditions for availing Modvat Credit was filing a declaration before receiving the capital goods. The Assistant Commissioner disallowed the Modvat Credit initially, but the Commissioner (Appeals) found some goods to be capital goods and remanded the case for re-examination. The appellant, upon receiving the Order-in-Appeal, informed the Assistant Commissioner and took back the Credit. The Revenue argued that the appellant should have waited for the Adjudication Order in the remand proceedings before taking back the Credit. However, the Tribunal found that once the initial Adjudication Order disallowing the Credit was set aside, the appellant had the right to take back the Credit in their books of account. The Tribunal cited previous decisions supporting this interpretation.Conclusion:The Tribunal allowed the appeal filed by the appellant, stating that they were eligible to take back the Modvat Credit in their books of account after the initial Order disallowing the Credit was set aside. The Tribunal emphasized that the appellant would be liable to reverse or pay the Credit if the Department's appeal was allowed or if the Credit was disallowed in the de novo adjudication. The Tribunal highlighted the importance of following Modvat Rules and the rights of the appellant in such situations, emphasizing the need for timely re-adjudication by the competent authority.