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TMI Blog2001 (2) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... ng adjustment of duty paid under Rule 57F(1)(ii) from the whole demand when on the contrary the Tribunal themselves held that the party intentionally adopted the modus operandi of clearing the goods under Rule 57F(1)(ii) to evade payment of duty. II. Whether the Tribunal was correct in allowing credit in respect of foundry chemicals, Hydraulic Jacks, Transformers, under Rule 57A of Central Excise Rules, when the items are not inputs in terms of Rule 57A of the Central Excise Rules, 1944. 2.The respondent M/s. Bharat Heavy Electricals Ltd., Piplani, Bhopal, (hereinafter referred to as "BHEL") is the manufacturer of items falling under Chapters 84 and 85 of Central Excise Tariff Act, 1985. BHEL procured inputs and cleared them on payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty paying documents were not produced before Excise Authorities (ii) the duty paying document does not contain payment particulars or not preauthenticated or not in the name of party (iii) some items on which Modvat credit under Rule 57A was taken were actually not inputs used in or in relation to manufacture of final product. The extended period as provided under proviso to Section 11A was also invoked to adjudicate the matter. Six show cause notices were issued. The said notices were adjudicated by the Commissioner, Central Excise, Bhopal vide order dated 27-2-99 as under : (1) In respect of show cause notice dated 2-6-88, Higher Notional Credit of Rs. 8,10,535.73 paise was disallowed under Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 11AC. The Commissioner imposed penalty of Rs. 1 crore on BHEL under Rule 173Q of the Central Excise Rules, 1944. The BHEL preferred five separate appeals before the CEGAT. These appeals were decided finally on 28-9-2000. CEGAT came to the conclusion that the demands were not hit by limitation and that extended period as provided under Section 11A of the Central Excise Act came to rescue of the department. The benefit of the Higher Notional Credit was not available to the BHEL. It ordered the adjustment of the duty paid at the time of clearing the goods under the provisions of Rule 57F(1)(ii) from the total credit of Higher Notional Credit taken by the BHEL and differential duty was directed to be paid on recomputation. The pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formers. Hydraulic Jacks being handling equipments are not inputs. The transformers are equipments used for supplying electricity to the machines and clearly not inputs. Hence, no Modvat credit was inadmissible. 5.With respect to first question whether Tribunal was correct in allowing adjustment of duty paid under Rule 57F(1)(ii) from the whole demand in view of the conduct of BHEL. The Tribunal has found that BHEL did not follow the correct procedure and took unintended benefit by taking higher notional credit. But, the fact remains that at the time of clearing the goods under the provisions of Rule 57F(1)(ii), BHEL had paid duty on the inputs. The orders were passed by the Revenue on the ground that they are not entitled to adjustment on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the nature of the goods being highly unstable and quickly fragmentable and losing its character in a couple of days, it was held by their Lordships that it cannot be said that same could be marketed and therefore it was not dutiable goods. In the instant case BHEL was claiming Modvat credit of duty paid on foundry chemicals which are used for the purpose of making sand moulds. The duty being utilized for payment of excise duty on the final product. The BHEL manufactures various excisable goods including mechanical and electrical appliances falling under Chapters 84 and 85 of the Central Excise Tariff Act, 1985. Sand mould is formed when sand is rammed against a pattern, whether the sand is confined within a box or not, and where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished goods, and where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture of processing of goods would be commercially inexpedient, that process would fall within the expression "in relation to manufacture of final product". 9.The Apex Court in case of Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar and Others, 1965 (16) STC 259 had also taken the view that locomotives and motor vehicles used to transport ore from the mines to the factory to enable ore being converted into copper products, can be said to be used in the manufacture of copper products. 10.In case of Collector of Central Excise v. Eastend Paper Industries Ltd., 1989 (43 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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