MARUTI UDYOG LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) M /s. Maruti Udyog Ltd. have filed this Appeal being aggrieved by the Order -in -Original No. 7/2002, dated 28 -2 -2002 under which the Commissioner, Central Excise has confirmed the demand of duty and imposed a penalty of equivalent amount.

(2.) SHRI B.L. Narsimhan, learned Advocate, submitted that the Appellants manufacture motor vehicles; that they purchase various parts on payment of duty of which they take Modvat credit; that the Appellants also purchase on payment of duty various parts for their Spare Parts Division (SPD) in respect of which they do not take Modvat credit of the duty; that sheet metal parts purchased for use in the manufacturing division are sometimes cleared to the SP Division; that these parts have been subjected to electro deposition coating in Order to protect them from weather conditions; that while removing such coated parts, the Modvat credit thereon is reversed as required under Rule 57F of the Central Excise Rules, 1944; that the present proceedings have been initiated on the ground that parts in respect of which Modvat credit has been taken and which are removed after E.D, Coating, should be removed on payment of appropriate duty; that the price at which such parts were sold by the Spare Parts Division has been taken as the basis for demanding Central Excise duty,

(3.) THE learned Advocate, further, submitted that the Commissioner, in the Order impugned, while accepting the fact that the process of E.D. Coating does not amount to manufacture, has recorded his finding that the clearance of sheet metal parts after coating cannot be treated as clearance of inputs as such and thus appropriate duty has to be paid and the reversal of the Modvat credit alone would not be sufficient that this view of the Commissioner is not correct in view of the provisions of Rule 57F which provided for removal of inputs from the factory for home consumption on payment of duty which shall be the amount of credit that has been availed in respect of such inputs; that this position continued till March, 2001 in terms of provisions of Rule 57F and 57AB(1B); that the Larger Bench of the Appellate Tribunal, in the case of Commissioner of Central Excise v. Asia Brown Boveri, 2000 (120) E.L.T. 228 (LB), has held that the legal fiction of treating the inputs as having been manufactured was only to ensure the manufacture to reverse the credit availed on clearance of the inputs. He has also placed reliance on the decision in Maruti Udyog Ltd, v. Commissioner of Central Excise, New Delhi, Final Order No.443/2002 -A, dated 9 -9 -2002 wherein the Tribunal has upheld the removal of inputs to Spare Parts Division on reversal of Modvat credit up to 28 -2 -2001. Reliance has also been placed on the decision in the case of Commissioner of Central Excise, Indore v. Gwalior Electrical Industries, 2000 (122) E.L.T. 833 (Tribunal) wherein the Tribunal has held that conversion of duty -paid double paper covered wires into coils does not amount to manufacture and if the Modvat credit has been availed on duty -paid wire, the manufacture has to discharge the duty liability on wires equivalent to the Modvat credit availed of in terms of Larger Bench decision in Asia Brown Boveri case; that the Tribunal has also held that in such a case no penalty is imposable.