2007 (3) TMI 131 - AT - Central Excise

Tribunal rules in favor of Modvat credit, emphasizes liberal interpretation of Rule 57Q

The Tribunal set aside the demand for the denial of Modvat credit on various items of Capital Goods/Inputs, except for an amount of Rs. 77,061. The ... Cenvat/Modvat - Revenue contended that appellant not entitle for credit on the ground that they are not capital goods - After considering the fact held that in some cases appellant entitle for credit Issues:Denial of Modvat credit on various items of Capital Goods/Inputs.Analysis:1. The appeal was filed against the OIO No. 03/2005 dated 25-1-2005 passed by the Commissioner of Central Excise, Mangalore. The issue primarily revolved around the denial of Modvat credit on different items of Capital Goods/Inputs.2. The total credit disallowed amounted to Rs. 4,64,88,243/- for the period from June 1996 to December 1996. The denial of credit on chemicals like petrolite, absorbant, catalysts, etc., was challenged by the appellant. It was argued that certain amounts had already been reversed, making the demand unsustainable, which was accepted, and the demand was set aside.3. The credit related to Petroleum Testing Equipments worth Rs. 34,63,960/- was also disputed. The Adjudicating Authority's reasoning for denial was found inadequate, and it was held that credit on such equipment is admissible based on relevant legal precedents.4. Denial of credit amounting to Rs. 40,53,301 + Rs. 7,125/- due to non-production of the Triplicate copy of the Bill of Entry was challenged. The appellant cited case-laws supporting credit allowance based on attested copies, which was accepted, and the credit was deemed admissible.5. Credit denial on piping material, calibration kit, Aviation warning lamps, instruments, etc., totaling Rs. 44,16,458 + Rs. 1,56,799/- was contested. The Tribunal found the denial unjustified, especially considering the essential role of such items in a sophisticated petroleum refinery.6. Excess credit availed on certain items was reversed by the appellant, which was not considered by the Adjudicating Authority. The Tribunal ruled that no further demands could be made on the reversed amounts.7. Denial of credit worth Rs. 3,21,785/- due to invalid documents was challenged, and the Tribunal agreed with the appellant, allowing the credit based on the endorsed copy of GPI and invoices.8. Credit denial on specific amounts due to missing duplicate invoices was disputed. The Tribunal held that as long as the receipt and use of goods were not in dispute, credit cannot be denied on technical grounds, citing relevant case-laws.9. Denial of credit on certain items due to missing duty payment particulars in the invoice was upheld by the Tribunal, stating that in the absence of such details, credit is not admissible.10. The Tribunal concluded that except for an amount of Rs. 77,061/-, the balance of the demand of Rs. 4,64,88,243/- was not sustainable and set it aside. The appellant was directed to pay the inadmissible credit amount.11. The Tribunal highlighted the importance of interpreting Rule 57Q of the Central Excise Rules liberally, emphasizing that capital goods need not be exclusively used in the manufacture of final products. The judgment allowed the appeal, granting credit except for the specified amount, based on the essentiality of the items in a refinery setting.