AUTO CLUTCHES Vs. COMMISSIONER OF CENTRAL EXCISE, MANGALORE

JUDGEMENT

(1.) THIS appeal has been filed by a manufacturer of excisable goods who has availed Modvat credit on capital goods viz. 180 KV DG set and induction heater. The lower authorities on having observed that the said goods were removed from the premises of this small scale manufacturer to the adjacent premises and that would constitute violation of Rule 57 -S, inasmuch as capital goods on which Modvat credit has been availed have been removed outside the factory. This would therefore call for reversal of the credit availed and also the imposition of mandatory penalty under Rule 57 -U(6).

(2.) WE have heard learned Advocate Shri M.S. Nagarajan along with Shri Rajeshwara Sastry for the appellants who took us through the provisions of Rule 57 -U and 57 -S and submitted that the removal envisaged in Rule 57 -S is a qualified removal and goods only for purposes of export and or home consumption. Prior intimation of the authorities is envisaged only when capital goods on which Modvat has been availed are removed for home consumption and/or exported. No permission or intimation is required if such items are removed to a premises outside the factory boundary walls to adjacent building thereto, for reasons of space constraints, especially when the definition of factory as given in Section 2(e) of the Central Excise Act, 1944 which includes and means any premises or the precincts thereto is read. In the present case, they submit that the machinery items in question have only been removed to a adjacent premises and this removal was due to space constraints. They submit that they have reversed the duty credit availed on the present appeal is only as regards the mandatory penalty under Rule 57 -U(6). They submit that the lower authorities have not come to any finding of fraud, wilful intention to contravene the rules if any with intention to evade and avail wrong credit. For these procedural lapse if any no penalty was called for.

(3.) SMT . Radha Arun SDR for the department appears and reiterates the findings of the lower authorities and submits that once the item on which the Modvat credit has been availed and it is removed out of the boundary walls, the offence and violation of the provisions of the Rule 57 -S would be complete, as in this case and penalty under Rule 57 -U(6) should be imposed and upheld.