2005 (2) TMI 418 - AT - Central Excise

Appeal granted for Modvat credit on damaged goods, Tribunal finds Department error.

The Tribunal allowed the appeal against an Order-in-Original concerning Modvat credit on damaged goods. It found that damaged goods, even if put to use, ... Cenvat/Modvat - Damaged inputs - Demand - Limitation Issues:- Appeal against Order-in-Original regarding Modvat credit availed on damaged goods- Scope of remand order and findings of the Adjudicating Authority- Presumption of official acts under Section 114 of the Indian Evidence Act- Invocation of extended period of limitation- Procedure followed by the appellants for damaged goods- Failure to claim duty with the Insurance Company- Imposition of penalty and interest- Enhancement of penalty in remand proceedings- Applicability of Modvat credit on damaged goods- Interpretation of 'for use' in exemption notification- Distinction between exemption notification and Modvat creditAnalysis:The appeal was made against an Order-in-Original regarding the availing of Modvat credit on damaged goods imported by the appellants. The Tribunal had earlier remanded the matter to the Original Authority to determine if the authorities had knowledge of the damaged items based on the End Use Certificate issued. The Adjudicating Authority confirmed a demand for wrongly availed Modvat credit, interest, and imposed penalties. The appellants challenged the findings, arguing that the Authority went beyond the remand order's scope by considering unrelated issues and failing to account for the procedure followed for damaged goods.The appellants contended that the Authority wrongly concluded that the end-use certificates were obtained by misleading the department and that the extended period of limitation was not applicable as the Department had knowledge of the damaged goods. They also argued that credit cannot be denied for damaged goods put to use as per Rule 57D, and duty was not claimed with the Insurance Company for damaged goods. The appellants further challenged the imposition of penalties and interest, citing errors in the Authority's decision-making process.The Tribunal, after reviewing the contentions, found that the damaged goods were intended for use in the factory, as indicated by the end-use certificate issued based on the appellants' records. Following the interpretation of 'for use' by the Supreme Court, the Tribunal concluded that even damaged goods put to use should not be denied Modvat credit. The Tribunal emphasized that the Department was aware of the procedure followed by the appellants and allowed the appeal, stating that the Order-in-Original had no merits.The Tribunal's decision was based on the interpretation of relevant legal provisions and the applicability of Modvat credit on damaged goods, aligning with the Supreme Court's ruling on similar cases. The Tribunal's analysis focused on the factual circumstances and the procedural aspects of the case, ultimately leading to the allowance of the appeal with consequential relief for the appellants.