2012 (12) TMI 220 - AT - Central Excise

Partial Appeal Success: Modvat Credit Eligibility Confirmed Pre-1995, Disallowed Post-1995 with Reduced Demands

The Tribunal partly allowed the appeal, upholding the eligibility of Modvat credit on supporting structures for the period before 16-3-1995, confirming ... Modvat credit - definition of 'capital goods' - plant - supporting structures - availability of duty paying documentsModvat credit - definition of 'capital goods' - plant - supporting structures - Admissibility of modvat credit for MS angles, channels, sections, CTD bars, sheets etc. used in fabrication and erection of supporting structures for machinery for the periods before and after 16-3-1995. - HELD THAT: - For the period prior to 16-3-1995 the definition of 'capital goods' in Rule 57Q included the general expression 'machines, machinery, plant, equipment...'. Applying the Larger Bench/Appex Court ratio in Jawahar Mills Ltd. (endorsing the Apex Court's view in Scientific Engineering House Pvt. Ltd.) the term 'plant' covers apparatus used by a businessman for carrying on his business and is not confined to items having direct nexus with the final product. Accordingly, supporting structures for machinery fall within the term 'plant' and their component items (MS angles, channels, sections, CTD bars etc.) constitute part of 'capital goods' and are eligible for modvat credit for the period prior to 16-3-1995. With effect from 16-3-1995 the definition was amended to enumerate specific tariff headings and omitted the earlier general expression; following the later Larger Bench decision in Vandana Global Ltd. these structural items are not covered by the amended definition and are not eligible for credit from that date. [Paras 7, 8, 9, 10]Portion of the impugned order disallowing modvat credit for the supporting-structure items for the period prior to 16-3-1995 is set aside; the disallowance w.e.f. 16-3-1995 is upheld.Modvat credit - availability of duty paying documents - Sustainability of demands in respect of certain Chapter 84 and Chapter 73 items where dispute concerned whether duty-paying documents were available and whether credit had earlier been allowed. - HELD THAT: - The Tribunal examined the appellate orders of CCE (Appeals) dated 14-6-2004 which had reduced the original demands after perusal of records. The subsequent de novo order setting aside demands did not address availability of duty-paying documents. The Tribunal agreed with the earlier appellate findings and accepted that the reduced demands recorded in the 14-6-2004 order were correct on the record. [Paras 6, 10]Demands in respect of the Chapter 84 and Chapter 73 items are upheld to the reduced amounts as recorded by CCE (Appeals) (demand amounts as upheld in the impugned order).Final Conclusion: Appeal partly allowed: modvat credit disallowance in respect of MS angles, channels, sections, bars etc. used for supporting structures is set aside for the period prior to 16-3-1995 and upheld for the period w.e.f. 16-3-1995; the reduced demands in respect of the Chapter 84 and Chapter 73 items as determined by the appellate authority are upheld; consequential relief granted to the appellant. Issues Involved:1. Admissibility of Modvat credit on capital goods under Rule 57Q of Central Excise Rules, 1944.2. Validity of Modvat credit taken without valid documents.3. Eligibility of Modvat credit on structural steel items used for supporting structures.4. Determination of Modvat credit on items from Chapters 73 and 84 of the Central Excise Tariff.Issue-wise Detailed Analysis:1. Admissibility of Modvat credit on capital goods under Rule 57Q of Central Excise Rules, 1944:The appellant, a manufacturer of sugar, availed Modvat credit on various items of capital goods during the period from November 1994 to August 1995. The Assistant Commissioner initially disallowed Modvat credit of Rs. 48,14,702/- on the ground that the items were not covered by the definition of 'capital goods' under Rule 57Q. The Tribunal, in its Final Order dated 29-6-2001, set aside this disallowance and remanded the matter for de novo adjudication in light of the Larger Bench decision in CCE, Indore v. Surya Roshini Ltd. During subsequent rounds of adjudication, the Deputy Commissioner and the CCE (Appeals) issued conflicting orders regarding the eligibility of these items. The Tribunal, in its final analysis, upheld the eligibility of the items as 'capital goods' for the period prior to 16-3-1995, based on the definition that included 'plant,' which covered supporting structures for machinery.2. Validity of Modvat credit taken without valid documents:The Assistant Commissioner disallowed Modvat credit of Rs. 4,99,229/- on the ground that it was taken without valid documents. This disallowance was consistently upheld through various stages of adjudication, including the Tribunal's Final Order dated 29-6-2001 and subsequent orders. The Tribunal, in its final judgment, confirmed the modvat credit demand of Rs. 4,99,229/- as already upheld by the Tribunal's earlier order.3. Eligibility of Modvat credit on structural steel items used for supporting structures:The Deputy Commissioner, in the third round of de novo adjudication, dropped the demand of Rs. 20,71,103/- in respect of MS Angles, Channels, CTD Bars, etc., used for supporting structures, following the Tribunal's earlier orders. However, the CCE (Appeals) restored this demand, arguing that the judgments cited by the Tribunal were not applicable to the definition of 'capital goods' for the period in question. The Tribunal, in its final judgment, referred to the Larger Bench decision in Jawahar Mills Ltd. v. CCE, Coimbatore, which held that supporting structures for machinery are covered by the term 'plant' and thus eligible for Modvat credit. Consequently, the Tribunal set aside the impugned order denying Modvat credit for the period prior to 16-3-1995 but upheld the disallowance for the period from 16-3-1995 onwards.4. Determination of Modvat credit on items from Chapters 73 and 84 of the Central Excise Tariff:The dispute over Modvat credit of Rs. 1,02,237/- and Rs. 42,065/- on items from Chapters 73 and 84 centered on the availability of duty-paying documents. The Tribunal noted that the CCE (Appeals) had previously reduced these demands to Rs. 41,775/- and Rs. 38,815/- respectively, after examining the records. In the final judgment, the Tribunal agreed with this reduction and upheld the demands of Rs. 41,775/- and Rs. 38,815/-.Conclusion:The Tribunal's final judgment partly allowed the appeal, providing consequential relief. It upheld the eligibility of Modvat credit on supporting structures for the period prior to 16-3-1995, confirmed the disallowance for the period from 16-3-1995 onwards, and upheld the reduced demands for items from Chapters 73 and 84. The Tribunal also confirmed the disallowance of Modvat credit taken without valid documents.