2004 (4) TMI 375 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on G.I. Sheets and Silicon Spray, imposition of penalty equal to the wrongly availed Modvat credit.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the denial of Modvat credit to the respondents on G.I. Sheets and Silicon Spray, along with the imposition of a penalty equal to the amount of the Modvat credit wrongly availed by them. The adjudicating authority disallowed the Modvat credit on all goods subject to the show cause notice, including the G.I. Sheets and Silicon Spray. However, the Commissioner (Appeals) allowed the Modvat credit on all goods, including the disputed items.

The main issue in the appeal was the allowance of Modvat credit on G.I. Sheets and Silicon Spray. The Commissioner (Appeals) had allowed the credit on G.I. Sheets, citing their use in the factory premises to protect the manufactured Polyester Films from dust. However, the Appellate Tribunal disagreed, stating that the G.I. Sheets were not used directly or indirectly in the manufacture of the final product, Polyester Films. Therefore, the Modvat credit on G.I. Sheets was disallowed. On the other hand, the Tribunal upheld the allowance of Modvat credit on Silicon Spray, which was used as an anti-rusting material for cleaning/lubricating machines involved in the manufacturing process.

Regarding the imposition of a penalty for availing wrongful Modvat credit on G.I. Sheets, the Tribunal ruled in favor of the respondents. The Tribunal reasoned that the imposition of the penalty was not proposed in the show cause notice, and thus, the Revenue could not go beyond the scope of the notice. Consequently, the impugned order of the Commissioner (Appeals) was modified, disallowing the Modvat credit on G.I. Sheets but upholding it on Silicon Spray. The appeal of the Revenue was disposed of accordingly.