2006 (2) TMI 376 - AT - Central Excise

Summary

Issues: Disallowance of Modvat credit, Penalty imposition

The judgment by the Appellate Tribunal CESTAT, Chennai addressed the disallowance of Modvat credit amounting to Rs. 19,94,383/- for the month of March, 2001, and the imposition of a penalty of Rs. 1,000/- on the appellant. The lower authorities disallowed the credit on structurals claimed to be capital goods eligible for Modvat credit. The Tribunal found that the structurals in question were not established as parts/components of identifiable machinery eligible for Modvat credit. The appellant failed to provide relevant tariff entries for the machineries claimed to include the structurals as parts/components. The eligibility of capital goods for Modvat credit during the disputed period was dependent on their tariff classification. As the appellant could not prove that the structurals were used as parts/components of capital goods eligible for credit based on tariff classification, they were directed to pre-deposit the duty amount. However, they were exempted from pre-depositing the penalty due to its small size. The appellant was given four weeks to make the pre-deposit, with compliance to be reported by a specified date. The judgment was dictated and pronounced in open court, emphasizing the importance of establishing prima facie eligibility for Modvat credit based on tariff classification to avail of the credit and waiver of pre-deposit.