2004 (6) TMI 554 - AT - Central Excise

Court restores duty decision with modifications, limits credit to job worker payment. Precedents inapplicable, penalty for double credit.

The court set aside the Commissioner (Appeals) order and restored the adjudicating authority's decision with modifications. The respondents were only ... Cenvat/Modvat - Capital goods - Penalty Issues: Availability of Modvat credit under Rules 57Q and 57S, Correctness of the order by Commissioner (Appeals), Applicability of legal precedents.Issue 1: Availability of Modvat credit under Rules 57Q and 57SThe appeal centered around the availability of Modvat credit to the respondents for an amount of Rs. 1,43,735. The respondents had availed this credit based on an invoice from a job worker to whom they had sent goods for conversion/repair. The adjudicating authority disallowed the credit citing non-compliance with Rules 57Q and 57S. The Commissioner (Appeals) reversed this decision, referencing the law laid down in a previous case. The learned JDR argued that the credit could not be availed under these rules, while the consultant contended that the credit was indeed available under Rule 57Q(2) and 57S, citing legal precedents to support this claim.Issue 2: Correctness of the order by Commissioner (Appeals)After hearing both sides and examining the records, it was found that the respondents had cleared 'Brass Tubes' without paying duty to a job worker. The respondents had previously availed credit on these goods under Rule 57Q but did not comply with Rule 57S when clearing the goods. The judgment emphasized that the respondents, not being the manufacturers of the goods, could not claim credit under Rule 57Q again. It was concluded that the respondents were only entitled to credit for the duty paid by the job worker on fabrication, amounting to Rs. 41,550, and not the full disputed amount of Rs. 1,43,735.Issue 3: Applicability of legal precedentsThe judgment clarified that the legal precedents cited by the consultant were not applicable to the present case. It distinguished the facts of previous cases where duty was paid on inputs or capital goods sent for machines, which were cleared under specific rules. In this case, the respondents were found to have wrongly availed credit on the same capital goods twice without justification. Consequently, the respondents were held liable to pay a penalty equal to the disallowed credit amount of Rs. 1,43,737. The judgment emphasized that penalties are necessary in cases of wrongful credit availment unless exceptional circumstances dictate otherwise.In conclusion, the impugned order of the Commissioner (Appeals) was set aside, and the order-in-original of the adjudicating authority was restored with modifications in the credit amount and penalty. The appeal of the Revenue was disposed of accordingly.