1999 (2) TMI 296 - AT - Central Excise

Summary

Issues:
1. Availability of Modvat credit under capital goods scheme to Carding Machines.
2. Barred demands by time and disputed question of manufacture.
3. Examination of evidences and right to challenge them before the original authority.

Analysis:

Issue 1: Availability of Modvat credit
The appeal revolved around the availability of Modvat credit under the capital goods scheme to Carding Machines received by manufacturers in April 1994. The appellant contended that the carded/combed cotton, considered as an intermediate product, was marketable goods, thus eligible for Modvat credit. The Tribunal had previously examined a similar issue in the case of Singaravelar Spinning Mills Pvt. Ltd. & Others, where the marketability of carded/combed cotton was a crucial factor.

Issue 2: Barred demands by time and disputed question of manufacture
The appellant argued that the demands were time-barred as they had intimated about the installation of additional equipment back in 1974. They claimed that the factory was under physical control during the machine installation, and various details were recorded by the Audit Office. The Collector overruled these pleas, confirming the demands and imposing penalties. The appellant believed that the demands should not be confirmed due to a bona fide belief that the erection did not constitute manufacture.

Issue 3: Examination of evidences and right to challenge
The respondents sought to challenge the evidences presented by the Revenue, claiming they had a right to examine and respond to the evidence before the original authority. They argued that the goods relied upon as marketable were different from carded/combed cotton. The Tribunal acknowledged the importance of allowing the respondents to test the veracity of the evidence, emphasizing the right to examine evidence before an adverse decision is made. The Tribunal found merit in the argument that denial of the right to examine evidence would result in a denial of justice.

In conclusion, the Tribunal set aside the Order-in-Appeal and Order-in-Original, remanding the matter to the original authority for reconsideration. The original authority was directed to provide the evidences regarding the marketability of carded/combed cotton to the respondents and allow them to respond before making a new decision. The Tribunal emphasized the importance of ensuring a fair opportunity for both sides to present their case and examine the evidence, highlighting the principles of natural justice.