2004 (3) TMI 664 - AT - Central Excise

Summary

Issues:
Confirmation of duty regarding irregular Modvat credit taken by the appellant without necessary permission.

Analysis:
The appeal was filed against the confirmation of duty amounting to Rs. 63,327 for irregular Modvat credit taken by the appellant. The show cause notice alleged that the appellant had taken credit on capital goods without obtaining necessary permission from the Assistant Commissioner of Central Excise, as required by Rule 57T(3) or Rule 57T(7). The adjudicating authority disallowed the credit as the permission was not obtained. However, the show cause notice did not specify any other grounds of ineligibility except for the lack of permission.

The Assistant Commissioner's order elaborated on the requirement of filing contract documents/agreements/terms of conditions along with the invoices. The order exceeded the scope of the show cause notice. It was not clear from the order whether the documents submitted by the appellant had any deficiencies related to duty payment by the contractor. The documents did not show any deficiencies in duty paying documents, and the only objection raised was that the documents were in the name of the contractor.

Rule 57T(3) or its equivalent Rule 57T(7) empowers the Assistant Commissioner to allow the manufacturer to take credit of specified duty on capital goods paid by the contractor or job worker on sufficient cause being shown. The rule does not mandate prior permission for taking credit, leaving it to the Assistant Commissioner's discretion based on the circumstances presented. The Assistant Commissioner cannot disallow credit solely for the reason of lack of prior permission if the manufacturer has shown sufficient cause for taking the credit.

In this case, it was established that the capital goods were installed in the appellant's factory by the contractor, and the duty payment and installation were not in dispute. Therefore, the lower authorities erred in denying the credit based solely on the lack of prior permission. The Tribunal held that the orders of the lower authorities were not sustainable and set them aside, allowing the appeal and providing consequential relief in accordance with the law.