Customs, Excise and Gold Tribunal - Delhi
Alok Ferro Alloys Ltd. vs Cce on 4 December, 2002
Equivalent citations: 2003(86)ECC169
JUDGMENT V.K. Agrawal, Member (T)
1. M/s. Alok Ferro Alloys Ltd. has filed this appeal being aggrieved with the Adjudication Order No. 350/Commr/2002 dated 11.4.2002 by which the Commissioner, Central Excise has disallowed the Modvat Credit, demanded differential duty and has imposed separate penalties under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules, 1944.
2. Shri K.K. Anand, learned Advocate, submitted that the Appellants manufacture Ferro Alloys; that they got their Central Excise Registration endorsed for the manufacture of Electric Arc Furnace and Fabricated Items of Steel; that for the said purposes they had purchased various inputs and taken the Modvat Credit of the duty amounting to Rs. 44,56,789 in their RG 23A-Part II during 1.10.1994 to 31.3.1995; that after completion, they paid the duty of excise amounting to Rs. 42-45 lakhs from RG 23-Part II on the two arc furnaces on 12.3.95 and took the same as Modvat Credit of capita) goods in their RG 23C-Part II; that the Commissioner has allowed the Modvat Credit amounting to Rs. 37,39,031 under the impugned order on the ground that all the materials had been used for manufacturing steel shell of the Electric Arc Furnace and other components, fitments and sub-assemblies used forthe operation and functioning of the Electric Arc Furnace.
3.1 The learned Advocate, further, mentioned that the Commissioner has, however, disallowed Modvat Credit amounting to Rs. 7,17,758 in respect of M.S.Channel, C.T.Bar, M.S.Round, M.S.Rect Bar, Cement, M.S.Structural Cutting and plate cutting on the ground that these goods were used solely for construction of civil foundation and other holding structure and shades. The learned Advocate submitted that the Appellants are not disputing the disallowance of Modvat Credit in respect of cement and C.T.Bars and they had in fact reversed the credit taken by them in respect of said two items; that the Modvat Credit in respect of other items is admissible as these have been used in the manufacture of complete electric arc furnaces, equipment and the part of the furnaces. The learned Advocate also claimed that extended period of limitation is not attracted as they had filed Modvat declaration for availing of Modvat Credit and after availing the credit, they had used the same towards payment of duty on furnace and had submitted all duty paying documents to the Range Superintendent along with RT 12 Returns and RG 23A-Part I & II accounts; that in addition they had also got endorsed on their Registration Certificate the activity of manufacturing of Electric Arc Furnace; that the Commissioner has not discussed the aspect of time limit while passing the impugned order.
3.2 Shri Rajeev Tandon, learned SDR, countered by submitting that the Commissioner has given his specific findings that these goods are used for making civil construction and also construction of the structure for erection of shade and platform etc.; that Modvat Credit will not, therefore, be available to the Appellants. The learned SDR also contended that extended period of limitation would be invocable as the Appellants at no stage had disclosed to the Department that they would be using the materials for civil construction work.
3.3 We have considered the submissions of both the sides. As per Explanation 1 to Rule 57Q of the Central Excise Rules, 1944 at the relevant time capital goods means machine, machinery, plant, equipment used for processing or producing any product or for bringing about a change in any substance for the manufacture of the final products and spare parts, components or accessories of such machine/machinery, etc. A clear and specific finding has been given by the Adjudicating Authority that the impugned materials were used in civil construction and other holding structures. Certainly the civil construction and holding structures cannot be treated as parts, components or accessories of machine/machinery. The Appellants, however, have reversed the Modvat Credit taken on cement and CT Bars. We also agree with the learned SDR that extended period of limitation is invocable in the present matter as the fact of using the materials in civil construction was not disclosed by the Appellants to the Department. We, therefore, find no reason to interfere with the disallowance of Modvat Credit amounting to Rs. 7,17,758 and the recovery thereof. We uphold the same.
4.1 The learned Advocate also mentioned that if the amount of disallowed Modvat Credit of Rs. 7,17,758, is paid by them, the question of paying demand of Rs. 5,05,969 towards differential duty will not arise; that if they are required to pay differential duty, the same would be available to them as Modvat Credit on the capital goods. He also submitted that no penalty under Section 11AC of the Act is payable as the said section came into operation with effect from 28.9.1996 and the present matter pertains to a period prior to this date; that no penalty is imposable under Rule 173Q as there is nothing specific as to the nature of violation of any provisions of the Central Excise Rules.
4.2 The learned SDR submitted that penalty is imposable as Modvat Credit was wrongly availed of by the Appellants.
4.3 After considering the submission of both the sides, we agree with the learned Advocate that no differential duty is payable as the Appellants would be reversing the Modvat Credit of Rs. 7,17,758 as per Order mentioned in para 3.3 above. We, therefore, set aside the demand of differential duty amounting to Rs. 5,05,969. No penalty is imposable under Section 11AC of the Central Excise Act as the said provision came into effect only on 28.9.1996 whereas the matter pertains to period prior to the said date. We, therefore, set aside the penalty imposed under Section 11AC of the Act, in view of the facts of the case, we also set aside penalty imposed on the Appellants under Rule 1730 of the Central Excise Rules, 1944.