2006 (11) TMI 57

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.... these inputs are used for fabrication of complete painting system. The supplier of the painting system discharged the duty liability on these goods under the Chapter sub-heading No. 84.79. A show cause notice dated 21-10-2003 was issued to the respondent for denial of Modvat credit on these goods on the ground that the supplier's classification of the goods under Heading 84.79 has been reclassified into sub-heading No. 84.24 which is not eligible for availment of Modvat credit as capital goods. The respondent resisted the show cause notice on two grounds, on time-bar and on merits. The adjudicating authority confirmed the demand and also imposed equivalent amount of penalty. On an appeal, the learned Commissioner (Appeals) did not agree wi....

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.... denial of Modvat credit on the grounds that the demand is time-barred as there is no suppression or misstatement of the facts. They have also cited the Tribunal judgment in case of TELCO v. CCE, Pune (supra) in which the Tribunal allowed the credit in respect of imported goods even though the classification was made under heading 84.24 on the ground that what was received in the factory was only parts and not complete machine and hence credit would be available under Rule 57A as inputs. In the said TELCO case the Tribunal have however, disallowed the credit in respect of complete machine purchased by them from local buyers on the ground that these machines were purchased in fully assembled condition and hence would not fall under the categ....

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....Be that as it may be, I find that the respondent has availed the Modvat credit in the months of October and November, 98. It is not in dispute that inputs/capital goods from their supplier were received under the duty paying document, was indicating the Chapter sub-heading No. as 84.79 which was eligible for availment of Modvat credit as capital goods. On the plain reading of the show cause notice issued to the respondent, it is indicative that the supplier of the goods had only "misclassified" as regards the painting system and their parts. There was no allegation against the supplier regarding the misclassification was with intention to evade duty. Further, the show cause notice also indicates that the Divisional adjudicating authority of....