ILJIN AUTOMOTIVE PVT. LTD. Vs. CCE

JUDGEMENT

(1.) This appeal filed by the appellants is directed against the order in Original No. 25/2001 dated 1.11.2001 passed by the Commissioner of Central Excise, Chennai -II Commissionerate whereby he has confirmed a duty demand of Rs 1,09,39,967/ - under Rule 57U(3) of the Central Excise Rules, 1944 and another amount of Rs 5,61,959/ - under Rule 9(2) of the Rule read with Section 11A(1) of the Act This amount was however adjusted from the amount already paid by the appellants in their PLA. The Commissioner has also imposed mandatory penalty equal to the duty demanded viz. Rs. 1,09,39,967/ - in terms of Rule 57U(6) of the Rules apart from imposing another penalty of Rs. 10,00,000/ - under Rule 173(1)(bb) ibid.

(2.) Brief facts of the case are that the appellants are engaged in the manufacture of automobile components falling under chapter sub -heading 8708.00 of the Schedule to the CETA 1985 for M/s Hyundai Motors (India) Ltd. (M/S HMTL) and are discharging the duty liability for the automobile components manufactured and cleared by them. They also availed Modvat Credit in respects of inputs under the erstwhile Rule 57A and capital goods under erstwhile Rule 57Q of the CE Rules, 1944. Appellants herein have taken Modvat Credit in respect of machinery (capital goods) falling under chapters 84 and 85 of the CETA, 1985 to the tune of Rs. 1,09,39,967/ - in their RG 23C Part II account which were lent by M/s HMIL vide invoice No. 001 and 002 dated 2.6.98 under Rule 57Q based on their declaration under the Erstwhile Rule 57T(1) filed with the department. The said lending of the capital goods was based on an agreement titled "Leave and Licence Agreement" by which M/S HMIL had removed the capital goods for the permissive possession of the manufacturer (appellants). While removing the capital goods, M/s HMIL had reversed the applicable excise duties as per the provisions of the erstwhile Rule 57S(1)(ii). In terms of the agreement the ownership of the said capital goods vested with M/s HMTL and the appellants were not the owners of the said capital goods at any point of time. This factual position was accepted by the General Manager of the appellants and the Manager Taxation of M/s HMIL. In the circumstances show cause notice was issued to the appellants vide SCN No. 22/2000 dated 03.07.2000 alleging that the appellants have wrongly availed Modvat Credit on capital goods to the tune of Rs. 1,09,39,967/ - (in their RG23C Part II account) which were lent by M/s HMTL and that they have suppressed the fact of the ownership of the capital goods from the department. It was also alleged that the appellants have manufactured and cleared part of automobiles like Knuckle Assembly, Sub -assembly etc. for passengers cars using the capital goods supplied by M/s. HMTL and cleared the same without including the amortized cost of the said capital goods in the assessable value of the components cleared by the appellants. After considering the reply to the show cause notice and after affording personal hearing to the appellants, the impugned order demanding duty and imposing penalty was passed against which the party has come in appeal.

(3.) Shri R. Raghavan, learned Counsel for the appellants reiterated the grounds of appeal and submitted that ownership of the capital goods is not a criteria for availing Modvat Credit and there is no express provision in the rules about the ownership. He has also invited our attention to the judgment of the Tribunal in the case of Sharda Motors Industries Ltd. vs. CCE, Chennai -II reported in 2002 (51) RLT 33 (CEGAT -Del) wherein in similar facts and circumstances the Tribunal has held that credit in respect of inputs and capital goods cannot be denied though the capital goods are not owned by the assessee. The Tribunal held so after referring to the clarification issued by the Central Board vide circular No. 263/8/99 dated 1.3.89 wherein it was specified that Modvat Credit facilities would be available in cases of purchases as well as well as stock transfer. The said decision has been followed by South Zonal Bench in the case of M/s HIDS Automotives Ltd vide final order No. 575/2003 dATED 11/7/2003. He has also invited our attention to the order of the Mumbai -Bench of the Tribunal in the case of German Remedies Ltd. vs. CCE, Goa, reported in 2002 (144) ELT 606 wherein it was held that Modvat Credit not to be denied when available according to other provisions of rules, merely on ground of non -fulfilment of condition of Rule 57R(3). It was also held therein that appellants are not required to disclose whether they are owners of capital goods or not. He has further invited our attention to the order of the Delhi Bench of the Tribunal in the case of Rasandik Engineering Industries (I)Ltd. vs CCE, reported in 2003(55) ELT 784. He further submitted that there was no suppression of fact involved as the assessee has filed RT 12 return as well as declaration under Rule 57T have been filed and the department was well aware of the activities carried on by the assessee. He has also submitted written notes relating to facts and law to the Court. It is inter alia stated therein that there is no requirement to state in the declaration filed whether the capital goods for which credit is claimed in the said declaration is acquired by purchase or otherwise and that from 17.6.94 (after CEN 236/94 CE (NT) dated 17.6.94), the condition regarding ownership has been done away with as a measure of liberalization. He in the circumstances prayed for allowing the appeal.