Customs, Excise and Gold Tribunal - Mumbai
Modistone Limited Vs. Respondent: ... vs Bombay Tyre International Ltd. on 31 July, 2001
ORDER Ms Jyoti Balasundaram, Member (J)
1. These four appeals arise out of two commonly worded orders and were disposed off by this common order.
2. The brief facts are that the assessee, namely M/s. Modistone Limited (formerly known as M/s. Bombay Tyre International Limited) are manufactures of tyres, tubes and flaps and other products falling under Chapter 40 of the schedule to the Central Excise Tariff Act, 1985. They availed of modvat credit in terms of Rule 57A of the Central Excise Rules on the inputs used in the manufacture of the tyres and tubes. Tyres are meant for tractors of engine capacity not exceeding 1800CC are fully exempt from payment of duty in terms of notification 42/86-CE dated 10/02/1986 as amended. Therefore input credit is not admissible for inputs used in the manufacture of the incentive variety tyres and tubes. Since the assessee had availed modvat credit even on inputs which went into the manufacture of the exempted category of tractors, show cause notices proposing recovery of duty and proposing imposition of penalty were issued to them. The demands were confirmed the penalties imposed by the adjudicating authority. However, the Commissioner (Appeals) while holding that the bar of Rule 57C operated against the assessee, held that no ground for penal action was made out and hence set aside the penalty.
3. M/s. Modistone Limited has filed two appeals praying that the order directing reversal of credit be set aside while the Revenue has filed two appeals seeking imposition of penalty upon the assessee.
4. We have heard Shri Shaikh, learned DR and perused the records.
5. We find that the issue as to whether modvat credit is admissible when final product is not dutiable has been settled by the decision of the larger bench of the Tribunal in the case of Kirloskar Oil Engines Ltd. Vs. Collector of Central Excise, Pune 1994 (73) ELT 835. The Tribunal has held that Rule 57C clearly prohibits availment of inputs credit in respect of duty free final products and that credit taken for duty free portion of final products is erroneous and that such credit is recoverable in terms of Rule 571 of the Central Excise Rules. Therefore we hold that credit reversal is rightly directed and hence dismiss the assessee's appeals.
6. Coming to the appeals filed by the Revenue, the DR has contended that the assessee had the knowledge, that when they received inputs parts of the end products would be cleared without payment of duty and they had intention to evade payment of duty by not declaring the fact of use of inputs in the manufacture of the exempted variety of tyres and tubes in the declaration filed under Rule 57G of the Central Excise Rules. However, we cannot bring ourselves to agree with this statement. The same view as held by the assessee, namely, that they were not required to reverse the modvat credit in such a situation was also held by the Tribunal in the case of Collector of Central Excise Vs. Premier Tyres 1992 (62) ELT 104. It is only when there was emergence of a different view that the matter was referred to the larger bench and the issue subsequently came to be settled by the larger bench in the case of Kirloskar Oil Engines Ltd. Vs. Collector of Central Excise. Therefore intention to evade payment of duty cannot be attributed to the assessee.
7. We therefore hold that this is not a fit case for taking penal action against the assessee and that no penalty is warranted. We therefore reject the Revenue's appeals.
8. In the result at the four appeals are rejected.