EICHER TRACTORS LTD. Vs. CCE, JAIPUR

JUDGEMENT

(1.) THIS is an appeal filed against the decision of Collector of Central Excise (Appeals), New Delhi made in Order -in -Appeal No. 21 -CE/JPR/94/307 dt. 7.2.1994 whereunder he denied modvat credit claimed by the assessees on the automotive engine parts, as the amount had wrongly been availed without making corresponding entries in RG 23 Part I register without production of duty paying documents. The assessee is engaged in the manufacture of I.C. engines falling under heading 84.07. They manufacture agricultural tractors as well as stationary type of I.C. engines. The I.C. engines are predominantly used in the manufacture of agricultural tractors of engine capacity of less than 1800 CC. In this case, the appellants manufacture both exempted and dutiable I.C. engines at their Allahabad factory. In this case two notifications are applicable to parts of I.C. engines. They were Notification Nos. 217/85 and 216/87. In Notification No. 217/85 it will be found that it exempts all components of diesel oil operate I.C. engines with certain conditions. If the components parts are used in the factory then the fact of the manufacture of the said parts, Chapter X procedure is required to be followed. Majority of the inputs procured by the appellants is secured without payment of duty under the said Notification. The said Notification No. 216/87 is, according to the appellants, corollary to the Notification No. 217/85, in that it extends the benefit of exemption from duty to such of those component parts of I.C. engines which are specifically executed from 217/85. In this case during the course of checking it was found by the department that despite the final product being stationary types of engines the appellants was manufacturing I.C. engines meant for agricultural tractors and the assessee was using the specified parts of the I.C. engines procured by it for the use in automotive engines for tractors, and were diverted for use in the manufacture of stationary type of engines. Since the Chapter X procedure was not followed the modvat credit was sought to be denied. A show cause notice dated 9.7.1993 was issued. In the Show Cause -Notice it was stated as follows:

(2.) SHRI Pramod Banthia, Chartered Accountant argued that where the parts are used for declaring final products the assessee would be entitled to modvat credit when they paid duty. In effect he argued that when modvat credit which is beneficial legislation providing for prevention of cascading effect of the duty the entire matter has to be viewed in a proper perspective. He relied on the judgment of the Tribunal in Indocast Steel Foundry v. CCE : 1994 (74) ELT 579.

(3.) I have considered the rival submissions. It is true in this case, this case is to be viewed in the light of the judgment of the Tribunal in Indocast Steel Foundry case cited above. In paragraphs 4, 5 and 6 of the judgment the Tribunal has held as follows: