EICHER TRACTORS Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) BRIEFLY stated, the facts of the case are that the appellants are engaged in manufacture of tractors and parts thereof falling under Chapter Heading No. 8701 and 8708 of the Schedule to Central Excise Tariff Act, 1985 and availing Modvat Credit under Rule 57 -A of the Central Excise Rules, 1944. The appellants manufacture tractors of two types viz. Tractors having engine capacity of more than 1800cc and less than 1800cc. The tractors having engine capacity more than 1800cc are charge -able to Central Excise duty while those having engine capacity less than 1800cc are exempted under the provisions of Notification No. 164/86, dated 23 -2 -1986 as amended. The appellants are using three types of inputs for manufacture of tractors. The first type of inputs are those which are used exclusively in the manufacture of dutiable tractors. The second type of inputs are those which are common for dutiable as well as exempted tractors. The third type of inputs are meant exclusively for exempted tractors. The appellants availed Modvat Credit of duty paid on the inputs exclusively meant for use in the manufacture of exempted tractors from 1 -9 -1996 to 20 -9 -1996. They also informed Deputy Commissioner, Faridabad and Jurisdictional Superintendent vide their letter dated 10 -9 -1996 that the subject benefit was available under Rule 57C and new Rule 57CC and that they were requested to pay amount equal to 8% of the price. During the said period, the appellants availed Modvat Credit amounting to Rs. 18,37,104/ -.

(2.) A show cause notice dated 27 -12 -1996 was issued to the appellants proposing recovery of the above amount of Modvat Credit for the reason that, under the provisions of Rule 57 -C(2) and 57 CC, while they were entitled to take credit of common inputs which were used in the manufacture of dutiable and exempted tractors, they were not entitled to take credit of inputs exclusively meant for use in the exempted tractors and proposing imposition of penalty.

(3.) THE Assistant Commissioner confirmed the duty demand and also imposed penalty of an amount equal to the duty amount under Rule 173 -Q(1)(bb) of the Rules read with Section 11 AC of the Act. The Commissioner (Appeals) upheld the order of the Adjudicating authority holding as under :