2023 (12) TMI 43 - HC - Central Excise

HC dismisses Revenue appeal on wrongful MODVAT/CENVAT credit availment for capital goods under Rule 57AB

The Telangana HC dismissed the Revenue's appeal regarding wrongful availment of MODVAT/CENVAT credit on capital goods. Despite intelligence reports ... Wrongful availment of MODVAT/CENVAT Credit on the capital goods - case of the appellant/Revenue is that on the basis of report from the intelligence, on scrutiny of the premises of the assessee, irregularity in availing the MODVAT credit on capital goods was detected - HELD THAT:- Given the fact that the appeal of the appellant/Revenue was primarily touching upon the applicability of the Notification No.214 of 1986 and also use of the term “capital goods as such” mentioned in Rule 57AB of the Central Excise Rules, 1944, it is opined that the judicial precedents referred to in the preceding paragraphs dealing with if not identical in almost similar circumstances lays to rest the question of law being agitated by the Revenue in this case. There are no substantial merits in the grounds raised by the Revenue in this case and the appeal thus fails and stands decided affirming the order passed by the Tribunal and the same stands decided in favour of the respondent/assessee - questions of law on which the appeal was admitted, stands answered against the appellant/Revenue and in favour of the respondent/assessee. Appeal dismissed. Issues involved:The issues in this case involve the appeal by the Revenue against the order passed by the Customs, Excise And Service Tax Appellate Tribunal. The main contention is regarding the availing of MODVAT/CENVAT Credit on capital goods by the respondent/assessee, which was challenged by the Revenue.Details of the Judgment:Issue 1: Availing of MODVAT/CENVAT Credit on Capital GoodsThe Commissioner held that the respondent had wrongly availed MODVAT/CENVAT Credit on capital goods in contravention of various provisions of the Central Excise Act and Rules. The Revenue contended that the machines used for processing rough crank cases were not used in the manufacturing of Special Purpose Machines (SPM) and General Purpose Machines (GPM). However, the Tribunal found that the case was covered by previous decisions, allowing the credit on capital goods used for both dutiable and exempted goods.Issue 2: Applicability of Notification No.214 of 1986The Tribunal relied on the Notification No.214 of 1986, which exempts goods used in job work for manufacturing final products. The High Court referred to previous judgments, including the one by the High Court of Bombay, emphasizing that duty payment on the final product determines the eligibility for credit on inputs.Issue 3: Interpretation of Rules and NotificationsThe judgment discussed the interpretation of Rule 57C and the purpose of the Notification No.217 of 1986. It referred to the Supreme Court's decision in ESCORTS LTD case, emphasizing that duty payment on the final product allows credit on inputs. The judgments by other High Courts were also considered, highlighting the importance of duty payment for availing credit on intermediary goods.Conclusion:The High Court dismissed the appeal by the Revenue, affirming the Tribunal's decision in favor of the respondent/assessee. The Court found no substantial merits in the Revenue's arguments, citing previous judicial precedents and interpretations of relevant rules and notifications. The appeal was thus decided in favor of the respondent/assessee, with no costs awarded.This summary provides a detailed overview of the judgment, highlighting the key issues, arguments, and conclusions reached by the High Court in this case.