2008 (1) TMI 312 - AT - Central Excise

Tribunal Upholds Denial of Credit, Reverses Decision on Invoices, Penalties

The Tribunal upheld the denial of credit amounting to Rs. 1,22,500 due to non-compliance with Rule 57-T(7) of the Central Excise Rules. However, the ... Allegation that damaged capital goods are cleared to job worker without reversal of the credit u/r 57-T(7) during the warranty period – new capital goods revived under invoice from supplier - held that revenue may demand on the clearance of the damaged goods cleared u/r 57-T challan if it was not returned back - However, there is no provision for adjustment of credit against the clearance of the damaged goods and the receipt of new capital goods. Therefore, denial of credit is set aside Issues:1. Denial of credit of Rs. 1,22,5002. Denial of credit of Rs. 1,49,046.133. Denial of credit of Rs. 1,57,8464. Penalty impositionDenial of Credit of Rs. 1,22,500:The appellant availed credit based on invoices mentioning the job worker's name, but the Commissioner (Appeals) noted that credit could only be allowed if approved by the Assistant Commissioner under Rule 57-T(7) of the Central Excise Rules, 1944. The appellant did not follow the required procedure under Rule 57-T(7), leading to the denial of credit. The Tribunal found that compliance with the procedure specified in Rule 57-T(7) is essential for allowing credit on invoices where duty is paid by a contractor or job worker. Therefore, the denial of credit amounting to Rs. 1,22,500 was deemed justified.Denial of Credit of Rs. 1,49,046.13:In this case, the lower authorities acknowledged that the job of extension was carried out by the job worker or contractor on behalf of the manufacturer, entitling the appellant to credit as per Rule 57-T(7). The invoices were issued in the name of both the appellant and the job worker or contractor. The Tribunal agreed with the appellant's argument that the invoices being in favor of the appellant justified the credit availed. The matter was directed to be examined by the Adjudicating Authority for further assessment.Denial of Credit of Rs. 1,57,846:The appellant allegedly cleared damaged capital goods without reversing the credit under Rule 57-T(7) during the warranty period. The Commissioner (Appeals) found that the appellant received new goods on payment of duty from the supplier, allowing Modvat credit on the goods. However, the appellant failed to reverse the credit upon clearance of the damaged goods, leading to the direction that the credit was admissible subject to the reversal of Modvat credit. The Tribunal disagreed with the Commissioner (Appeals) and held that since the appellant received new capital goods under Central Excise invoice, double credit on the same goods was not permissible. The denial of credit amounting to Rs. 1,57,846 was set aside.Penalty Imposition:The Commissioner (Appeals) noted the absence of any mala fide intent to misuse the Modvat facility, leading to the conclusion that penalty imposition was unjustified. The Tribunal concurred, stating that in the absence of malicious intent and considering that the issue revolved around the interpretation of Modvat Rules, the penalty was set aside. Consequently, the appeal was disposed of accordingly.