MAJESTIC AUTO LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The issue involved in these two appeals, filed by M/s. Majestic Auto Ltd. and M/s. Hero Briggs and Stratton Auto Ltd. relates to the availability of MODVAT Credit of the duty paid on the capital goods under Rule 57Q of the Central Excise Rules, 1944.

(2.) Shri S.V. Arya, learned Advocate, submitted that the Appellant No. 1, M/s. Majestic Auto Ltd. manufacture Motor vehicles and parts/accessories thereof; that they have purchased machines and equipment - partly prior to introduction of Modvat credit scheme to capital goods and partly afterwards; that these capital goods are exclusively used by them in the manufacture of I.C. Engines, one of the parts of motor vehicles; that in respect of the Capital goods received after introduction of Modvat credit Scheme, they had availed of Modvat credit of the duty paid thereon; that another Hero Group company namely Hero Briggs and Stratton Auto Pvt. Ltd., Appellants No. 2, had taken on lease on 25 -8 -1998 a part of factory premises of the Appellants No. 1 who had also sold machines and equipment purchased prior to introduction of the Modvat credit scheme in respect of capital goods (i.e. prior to 1 -3 -1994) to Appellants No. 2 regarding which there is no dispute. He mentioned that the Appellants No. 1 have also sold other machines and equipment on which they had availed of Modvat credit under Invoice No. 020103456, dated 28 -4 -1998 on payment of Central Excise duty; that some machines and equipments, in respect of which Modvat credit had been availed of by them, had been left as such in the part of the factory leased to Appellants No. 2; that the Appellant No. 1 discontinued manufacture of I.C. engines which were now got manufactured on job work basis from the Appellants No. 2; that the Commissioner, under the impugned Order, has confirmed the demand of duty in respect of the machines and equipments left by them in the part of the factory leased to the Appellants No. 2, and imposed penalty equal to the amount of duty besides asking them to pay interest also.

(3.) The learned Advocate submitted that provisions of Section 11A of the Central Excise Act were not applicable to the Modvat rules on 25 -8 -98 as the same had been applied to the recovery of credit only from 1 -4 -2000 onwards; that the Supreme Court has held in the case of CCE, Jaipur v. Raghuvar (India) Ltd., 2000 (118) E.L.T. 311 (S.C.) that "Section 11A on its own terms will have no application or operation to cases covered under Rule 57 -1 of the Rules."; that, therefore, demand of duty confirmed under Section 11A of the Act is not sustainable; that further the impugned capital goods were manufactured by others who had already paid duty thereon; that thus duty cannot be demanded from them who are not manufacturer of the said goods. He, further, mentioned that duty can also not be demanded under Rule 57S of the Central Excise Rules, 1944 because Rule 57S provides for recovery of the credit wrongly taken whereas the demand of duty is not on the premises that the credit was taken wrongly; that the amount demanded is neither the amount of illegal or wrong Modvat credit nor is the duty of excise and there is no recovery proceeding machinery in the Act and Rules; that in Pushpaman Forgings v. CCE, Mumbai -VII, 2002 (149) E.L.T. 490 (T) the Tribunal has taken the same view relying upon the judgment of the Madras High Court in Eternit Everest Ltd. v. Union of India, 1997 (89) E.L.T. 28 (Mad.) and Board's Circular B -42/1/96 -TRU, dated 27 -9 -1996. He also contended that demand of duty under Rule 57U(4) is also not sustainable as the capital goods in question were not manufactured by the Appellants No. 1; that the demand of duty under Rule 57U(4) amounts to levy of duty of excise again illegally and without authority is borne out from the fact that these provisions were amended and instead of "payment of duty leviable" it provided for "payment of an amount equal to the amount for which credit was taken" which is contained in Sub -rule (4) of Rule 3 of Cenvat Credit Rules, 2002; that further no removal has taken place as the goods were found to have been installed in their original position; that the ratio of the decision in Madras Electro Castings Ltd. v. CCE, Chennai, 2001 (136) E.L.T. 713 (T) is not applicable as the facts are different as in the said case, the capital goods were removed from the factory and were given on loan whereas in the instant matter, the capital goods were neither leased nor given on loan; that the Appellant No. 1 continues to own these goods and even continues to avail of the depreciation thereon under the Income Tax Act; that the impugned machines continue to be used only in the manufacture of I.C. engines which in turn are used for manufacture of motor vehicles which was the case even prior to leasing out of the portion of the factory to the Appellants No. 2. He relied upon the decision in the case of Jamna Auto Industries Ltd. v. CCE, Indore, 2001 (130) E.L.T. 181 (T) wherein the manufacture of some goods was transferred to newly established Division which had obtained a separate Central Excise Registration and the capital goods were also transferred to the newly established Division; the entire premises had remained as such; the Tribunal has held that for removal as envisaged under Rule 57S, there has to be physical removal.