Case Note & Summary
The Commissioner of Central Excise appealed against the CESTAT order which had confirmed the Commissioner (Appeals) order setting aside the Deputy Commissioner's order disallowing Modvat credit. The respondent, M/s. Rudra Industries, manufactured parts and accessories of motor vehicles and availed Modvat credit on capital goods under Rule 57Q of the Central Excise Rules, 1944. They filed a declaration under Rule 57-T(1) that the capital goods would not be used for manufacture of exempted goods. However, records showed that the capital goods were used exclusively for processing input/semi-process goods on job work basis under Rule 57F(4), which were exempted under Notification No. 214/86-CE. A show cause notice was issued on 14-11-1997 to disallow the credit. The Deputy Commissioner disallowed the credit, but the Commissioner (Appeals) set aside that order, and CESTAT confirmed it. The High Court reversed, holding that the capital goods were used for manufacture of exempted goods, thus credit was not admissible. The court allowed the appeal and set aside the CESTAT order.
Headnote
A) Central Excise - Modvat Credit - Capital Goods - Rule 57Q of Central Excise Rules, 1944 - The issue was whether Modvat credit on capital goods is admissible when the capital goods are used exclusively for processing exempted goods on job work basis under Rule 57F(4). The court held that the capital goods were used for manufacture of exempted goods and hence credit was not admissible. The declaration under Rule 57-T(1) was violated. (Paras 2-4)
B) Central Excise - Exempted Goods - Notification No. 214/86-CE - The goods processed on job work basis were exempted under Notification No. 214/86-CE dated 25-03-1986. The court held that the use of capital goods for such exempted goods disentitles the assessee from Modvat credit. (Paras 2-4)
Issue of Consideration
Whether the respondent was entitled to Modvat credit on capital goods used exclusively for processing exempted goods on job work basis under Rule 57F(4) of the Central Excise Rules, 1944.
Final Decision
The High Court allowed the appeal, set aside the CESTAT order dated 02-06-2005, and restored the order of the Deputy Commissioner (Modvat) dated 20-12-1999 disallowing the Modvat credit.
Law Points
- Modvat credit on capital goods is not admissible when the capital goods are used exclusively for processing exempted goods on job work basis
- Rule 57Q of Central Excise Rules
- 1944
- Notification No. 214/86-CE dated 25-03-1986
- Rule 57F(4)
- Rule 57-T(1)
Case Details
2013 LawText (BOM) (02) 83
EXCISE APPEAL NO. 2 OF 2006
Ms. Susan Linhares, Central Govt. Standing Counsel for the appellant; Mr. M. S. Sonak, Advocate for the respondents.
The Commissioner of Central Excise, ICE House, Patto, Panaji, Goa 403001.
1. M/s. Rudra Industries, Bhuipal, Honda, Sattari, Goa. 2. M/s. Automobile Corporation of Goa Ltd., Sattari, Honda, Goa.
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Nature of Litigation
Excise Appeal against CESTAT order confirming Commissioner (Appeals) order setting aside Deputy Commissioner's order disallowing Modvat credit.
Remedy Sought
Revenue sought to disallow Modvat credit availed by respondent on capital goods used for processing exempted goods on job work basis.
Filing Reason
Respondent availed Modvat credit on capital goods but used them exclusively for processing exempted goods on job work basis, violating declaration under Rule 57-T(1).
Previous Decisions
Deputy Commissioner (Modvat) disallowed credit on 20-12-1999; Commissioner (Appeals) set aside that order on 26-04-2000; CESTAT confirmed Commissioner (Appeals) order on 02-06-2005.
Issues
Whether Modvat credit on capital goods is admissible when the capital goods are used exclusively for processing exempted goods on job work basis under Rule 57F(4) of the Central Excise Rules, 1944.
Submissions/Arguments
Appellant argued that the capital goods were used for manufacture of exempted goods, hence credit was not admissible.
Respondent argued that the goods were processed on job work basis and not manufactured, so credit was admissible.
Ratio Decidendi
Modvat credit on capital goods under Rule 57Q is not admissible when the capital goods are used for manufacture of exempted goods, including processing on job work basis under Rule 57F(4) for exempted goods.
Judgment Excerpts
The Revenue/appellant is challenging the judgment and order passed by the CESTAT dated 2nd June, 2005, by which it was pleased to confirm the order passed by the Commissioner (Appeals) dated 26th April, 2000, who, in turn, had set aside the order passed by the Deputy Commissioner (Modvat) dated 20th December, 1999.
The brief facts are as under : Respondent No.1 manufactured parts and accessories of motor vehicles and they had been availing Modvat/Cenvat facilities under Rule 57Q of the Central Excise Rules, 1944.
Procedural History
Deputy Commissioner (Modvat) disallowed Modvat credit on 20-12-1999. Commissioner (Appeals) set aside that order on 26-04-2000. CESTAT confirmed Commissioner (Appeals) order on 02-06-2005. Revenue appealed to High Court, which allowed the appeal on 18-02-2013.
Acts & Sections
- Central Excise Rules, 1944: Rule 57Q, Rule 57F(4), Rule 57-T(1)
