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CCE, Visakhapatnam-I Versus M/s Rashtriya Ispal Nigam Ltd.

Cenvat Credit / MODVAT Credit - capital goods - diverting the steel items for non-manufacturing operations like fabrication, maintenance of structures, etc., and in manufacture of goods exempted from duty. - Held that:- Undeniably steel pipes are an essential/integral part of T.G. set without which the T.G. set cannot be put into use. T.G. sets would fall under the category of capital goods as 'generating sets' are expressly mentioned in the definition. - Credit allowed - Decided against the rev .....

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r-alia, engaged in manufacture of Iron & Steel products. They were availing facility of MODVAT Credit of duty paid on inputs & capital goods. They availed credit on steel plates & sheets as inputs. It was alleged by department that respondents wrongly availed MODVAT Credit by diverting the steel items for non-manufacturing operations like fabrication, maintenance of structures, etc., and in manufacture of goods exempted from duty. 3. A show cause notice was issued and after due proce .....

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inal dated 25.06.2004 the adjudicating authority denied the credit & confirmed the demand of ₹ 40,79,054/- along with interest and imposed equal amount of penalty, besides separate penalty of ₹ 1,00,000/- imposed under Rule 173Q. 4. Aggrieved by this order, the respondent herein filed appeal before the Commissioner (Appeals) and vide the order impugned herein the Commissioner (Appeals) allowed the credit. Hence Revenue is now before us. 5. We have heard both sides and perused the .....

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ion No. 67/95- CE dated 16.03.1995 as steel pipes did not come within the definition of capital goods. Pipes and tubes were included in the definition of capital goods only w.e.f. 01.03.1997. That steel pipes were not covered under Notification No. 68/95 - CE dated 16.03.1995 also, since they were not manufactured in workshop and were not meant for repairs or maintenance of machinery installed in the plant. Therefore, steel pipes though chargeable to duty, the respondents did not discharge their .....

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quot;In view of the submissions made by both sides, we are of the view that the adjudicating authority is required to examine whether the said inputs are eligible for MODVAT Credit or not and to pass appropriate order in accordance with law . 8. Thus as per the mandate of Tribunal, the original authority had to re-adjudicate the matter in the light of the issue whether credit is admissible on steel plates and sheets under the category of inputs. 9. On perusal of records it is seen that steel she .....

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CE dated 16.03.1995. For better appreciation the relevant portion of the said notification is noticed as under: "the Central Government hereby exempts goods specified in column (2) of the Table hereto annexed (hereinafter referred to as 'inputs') manufactured in a factory and used within the factory of production, in or in relation to the manufacture of final products specified in column (3) of the said Table, from the whole of the duty of excise leviable thereon, which is specifie .....

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have come in to existence during the course of manufacture of the final product and that such intermediate products or such inputs are used in the manufacture of capital goods as defined in rule 57D and that such intermediate products or capital goods, as the case may be are for the time being, exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty. " The third proviso to the said Rule reads as follows: "Provided also that credit of specified du .....

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ct for the finished goods, credit is not admissible. 13. Undeniably steel pipes are an essential/integral part of T.G. set without which the T.G. set cannot be put into use. T.G. sets would fall under the category of capital goods as 'generating sets' are expressly mentioned in the definition. The learned counsel for respondent adverted to the judgment laid in Bharat Electric Steel Company Ltd., vs CCE, Calcutta [1995 (77) ELT 289 (Tri)]. In the said case, MODVAT Credit was availed on in .....

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fore us, have been utilized in the manufacture of sand moulds and not in relation to the manufacture of iron/steel castings, the Department is giving a narrow meaning to the expression, 'intermediate goods'. The Department appears to be considering the single process of manufacture of goods. It forgets that there may be products, as in this case, that several preliminary processes of various goods are undertaken and those processes further converge into another process to make the final .....

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actions of various chemicals prior to production of final product in a single chain or reaction. This in our opinion, would not be the correct view in the vast variety of goods which are liable to excise duty and which are entitled to the facility of MODVAT Credit under a notification issued under Rule 57A. From that angle we respectfully agree with the observations of the Hon'ble High Court of Madras in the case of Ponds (India) Ltd., what it says in para 20 as already set out above". .....

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d in respect of any inputs shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty. It is pertinent to note that the products in relation to which inputs have been described both under Rule 57C and 57D (2) as final products and the final product in .....

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