TMI Blog2005 (5) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... r alternators. As such, they entertained a view that such replacement of the old engine/alternator with a new engine amounts to 'manufacture' and the applicants were required to pay duty on the same. 3. On the above basis, show cause notice was issued to them raising demand of duty in respect of 35 DG Sets. In respect of another 6 DG Sets, which were received back by the appellant in the year 1996-97 and 1997-98, it was found that the entries relating to the clearances were not completed, neither the said DG sets were physically present in the appellant's factory. Accordingly, the notice proposed to raise the demand of duty on 35 DG Sets as also on 6 DG Sets. In respect of another 3 DG Sets it was alleged that the appellants have used new engines/alternators, on which they have availed the Modvat credit. Inasmuch as the said DG Sets were cleared without payment of duty, Modvat credit was not available to the appellant in terms of Rule 57C. Notice also proposed imposition of penalty. 4. On adjudication, the Commissioner, vide his impugned order confirmed demand of duty of Rs. 1,83,452/- in respect of 6 DG Sets; of Rs. 19,03,261/- in respect of 35 DG Sets and also denied the Modv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture'. The above decision was confirmed by the Hon'ble Supreme Court when the appeal filed by the revenue was dismissed. 9. The said decision was followed by the Tribunal in their subsequent judgment in the case of CCE, Pune v. Dattanand Refrigeration Services Pvt Ltd. [2001 (132) E.L.T. 748 (Tri. - Mumbai)]. 10. Similarly in the case of Metro Tyres Ltd. v. CCE, Chandigarh [1996 (84) E.L.T. 485 (Tri.)], it was held that repair and reconditioning of old and defective electric fans by replacing parts, rewinding of motor, refixing of new/old number plates and selling of such repaired/reconditioned fans with new guarantee cards does not amount to 'manufacture' as it does not result in production of a new article. Similarly, in the case of Rajasthan Tools Pvt Ltd., v. Collector of Central Excise, Jaipur [1999 (108) E.L.T. 467 (Tri.)], the activity of replacement of damaged or worn out segment of an old circular saw with a new segment, was held as an activity of repair and not a manufacture. We also take note of another decision of the Tribunal in the case of CCE, Jaipur v. Lipi Data Systems Ltd. [2003 (156) E.L.T. 968 (T)], wherein the appellants were dismantling the old and used la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e defective compressors any part such as stators replaced by the appellant involves manufacturing activity attracting duty under the Central Excise Act. The appellant in the process of repairing scraps some components which cannot be repaired and one such component is stators. The stators were earlier manufactured in the factory of the appellants for repairing of the compressors. Later, the materials required for replacing the scrapped components are received on payment of duty from the factory of the appellant. The Service Centre sends these materials to outside job workers for making the stators. Thereafter the appellants undertook the shaping, varnishing and baking of such stator to fit such stators into the compressor housing. The Collector having felt that the activity of shaping, varnishing and baking done by the appellant on receipt of the stator from the job workers results in manufacture and initiated proceedings for adjudication of tax. " 14. As is seen, the dispute was not as to whether change of parts of defective compressor amount to manufacture or not. The question was that the activity of shaping, varnishing and baking done by the appellant received from their job ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. We are not convinced with the above arguments. If the Commissioner is confirming demand of duty on the repaired DG Sets, he could not have, at the same time, asked for reversal of the credit. The reversal is to be made as consequences of holding that the activity of repair does not amount to manufacture and as such no duty liability stands against the appellants. The Tribunal and the Hon'ble Supreme Court, in many cases has held that when the goods were being cleared without payment of duty e.g. on wrong availment of exemption notification and the demand is subsequently confirmed on the same, the benefit of Modvat credit cannot be denied to the assessee for the simple reason that while clearing the goods under an exemption notification, there could not have been any occasion for the assessee to follow the procedure and avail credit. The same becomes available to the assessee as a consequence of the confirmation of demand against him and should be allowed irrespective of non-following of procedure. For the same reason, in the event of demand being set aside by us, the appellant would have to reverse back the credit, as a consequence of the same. The revenue could not have raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 'will pass orders it thinks fit' following the decision of the Supreme Court in Hukumchand Mills Ltd. v. CIT - 1967 (63) I.T.R. 232 (S.C.), while interpreting the expression "pass orders as the Tribunal thinks fit", for the purpose of understanding the scope of s. 254, the Supreme Court held that that the said expression would include all powers, excepting the power of enhancement, which are conferred on the AAC while dealing with the first appeal." the Gauhati High Court in Jeypore Timber and Venner Mills (P) Ltd. v. CIT - 1982 (137) I.T.R. 415 (Gau) observed as follows : "The Tribunal has no power for the enhancement of any penalty or assessment nor can it remand a case with the object of such enhancement." If such powers, as are proposed herein, of reversal of credit are exercised, the Tribunal holds that Modvat credit is to be denied and recovered, then that will amount to enhancement of a liability i.e. amounts to be recovered, which is not permitted in law. (c) Further a denial of Modvat credit on inputs used in the generating sets cleared and demanding the same, is not subject matter in this appeal. Hence, any direction to the appellants to pay the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cleared under Rule 173H, has been utilized for making payments of duty on the generating set manufactured with the retrieved engine without any abatements in value. Though the procedure adopted by the appellant is peculiar, it was submitted there is no loss of revenue and there is also not undue gain to the appellants. This plea though attractive, is not upheld, since the inputs i.e. engines where not used in or in relation of manufacture of final products. (g) Granting of the request of reversal of credit on engines used up in repairs at this stage, would convert this Tribunal to a Exercise powers of a Court of equity which it cannot. 23. In view of the above the matter would be required to be referred to the third member. Sd/- S.S. Sekhon Member (Technical) Difference of Opinion In view of the difference in opinion, the matter may be placed before the Honorable President, to refer the following question for the opinion of the third member to resolve the difference. The question to be resolved is- "Whether, in the facts and circumstances of this case, the reversal of Modvat credit availed on inputs used up in repairs of DG sets could be ordere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion notification, there could not have been any occasion for the assessee to follow the procedure and avail credit. The same becomes available to the assessee as a consequence of the confirmation of demand against him and should be allowed irrespective of non-following of procedure. For the same reason, in the event of demand being set aside by us, the appellant would have to reverse back the credit, as a consequence of the same. The revenue could not have raised the demand on repaired DG Sets as also for reversal of Modvat credit at the same time. Admittedly, when the activity is being held as not amounting to manufacture with no duty liability, the appellant cannot avail the credit of duty paid on the new engines/alternators in terms of rule 57C. As such, we hold that the appellants would reverse the credit on the engines and alternators used for the repair of DG Sets". 29. Having said so Member (J) recorded that the matter be remanded to the original authority for applying the reasoning contained in para 18 quoted supra and quantify the duty, if any, against the appellant. The ld. Member (J) also held that the Commissioner to whom the matter is remanded may also consider impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. Heard both sides. 32. The ld. Advocate for the appellant reiterated the finding of Member (T) as brought out in para (d) above. He demonstrated as to how the appellant did not benefit in any way by using engines on which credit has been taken in the repair of DG Sets. He relied on the decision in the case of Geep Industries - 1999 (114) E.L.T. 850 wherein the Tribunal held that when revenue implication does not exist denial of Modvat credit is not permissible. The Tribunal further held that charge of suppression involving larger period is sustainable only when an assessee wants to obtain a benefit not available to him under the law. The ld. Advocate argued that the appellant has not availed any benefit not due to him, as the procedure adopted by him as brought out by Member (T) is revenue neutral. 33. The ld. DR, Shri R. Pardeshi argued that Member (J)'s observations in para 18 of her order flow from the facts of the case, that no new case is being made out at this stage; that show cause notice seeks to reopen an assessment wrongly made by the appellant; that when an assessment is reopened all aspects can be gone into by the Tribunal including the issue of eligibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stioned this determination, it chose to reopen the assessment. When the assessment is reopened all aspects of assessment including availability of Modvat credit can be gone into as has been decided by the Tribunal and the Courts. In the present case demands were made under proviso to Section 11A(1) of the Central Excise Act. I am unable to persuade myself to agree with the contention of Member (Technical) that 'the aspect of determining the short levy, non-levy etc. cannot be equated with the Modvat Rules'. In my view the present case is one of reopening of an assessment and the issue of availability of credit or otherwise is integrally linked with the main issue. The ld. Member (J) has not made out a new case as contended by Member (T). (c) Member (Technical)'s observation that the Tribunal is not a court of equity and therefore cannot provide relief, if any, to the Department has been carefully considered. It is observed that the same Tribunal on several occasions has granted relief of Modvat credit to the appellants while confirming demands on account of short levy/non-levy. It is the larger interest of justice that prevailed with the Tribunal while granting such relief ..... X X X X Extracts X X X X X X X X Extracts X X X X
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