The judgment established the interpretation of 'component' under Rule 57Q of the Central Excise Rules, 1944, and its application to the classification of 'Guide Car' for Modvat credit.

JUDGMENT :

M.R. Shah, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 16.10.2008 passed by the Customs, Excise & Service Tax Appellate Tribunal, Eastern Zonal Bench, Kolkata (hereinafter referred to as the ‘Tribunal’) in Appeal No. EDM-261/05, by which the learned Tribunal has upheld the demand of Rs. 45,86,664/-(Rupees Forty Five Lakhs Eighty Six Thousand Six Hundred and Sixty Four only) and reduced the penalty to Rs. 1,00,000/-(Rupees One Lakh only) holding that the appellant was not eligible for the duty credit in respect of the ‘Guide Car’, the assessee – M/s Steel Authority of India Limited has preferred the present appeal.

2. At the outset, it is required to be noted that the dispute is with respect to Modvat credit on ‘Guide Car’ claimed by the appellant – assessee.

3. The facts leading to the present appeal for the purpose of issue involved in the present appeal in a nutshell are as under:

A show cause notice dated 9.5.2000 was issued to the appellant seeking to deny Modvat credit amounting to Rs.3,09,78,465/- availed by the appellant on capital goods, i.e., ‘Guide Car’ during the month of March, 2000. As per the show cause notice, the Modvat credit on ‘Guide Car’ was not available since it was classifiable under Chapter subheading 8603.00 of the Central Excise Tariff Act, 1985 (hereinafter referred to as the ‘Tariff’).

3.1 The appellant replied to the show cause notice. It was the case on behalf of the appellant – assessee that there was no reason as to why ‘Guide Car’ should be classified under Chapter sub-heading 8603.00. According to the appellant – assessee, ‘Guide Car’ is classifiable under Chapter sub-heading 8428.90, as was being done by the supplier of the same to the appellant. An opportunity of personal hearing was also provided to the appellant.

3.2 Considering the fact that in the case of supplier, the ‘Guide Car’ was classified under Chapter sub-heading 8603.00, the Adjudicating Authority was of the opinion that the appellant shall not be entitled to the Modvat credit on ‘Guide Car’ considering Rule 57Q of the Central Excise Rules, 1944 (hereinafter referred to as the ‘Rules 1944’). The Adjudicating Authority disallowed the credit amounting to Rs. 1,71,60,376/- wrongly availed by the appellant during the month of March, 2000 which included the Modvat credit availed by the appellant on ‘Guide Car’. The Adjudicating Authority – Commissioner also imposed the penalty of Rs. 5,00,000/- under Rule 173Q of the Rules 1944.

3.3 Feeling aggrieved and dissatisfied with the Order-in-original passed by the Commissioner – Adjudicating Authority, disallowing the credit amounting to Rs. 1,71,60,376/- and imposing penalty of Rs. 5,00,000/-, the appellant preferred an appeal before the learned Tribunal. By the impugned judgment and order, the learned Tribunal has confirmed/upheld the demand of Rs. 45,86,664/- being the Modvat credit availed by the appellant on ‘Guide Car’. The learned Tribunal has reduced the penalty to Rs. 1,00,000/-.

3.4 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal upholding the demand of Rs. 45,86,664/- being the Modvat credit availed by the appellant on ‘Guide Car’ and penalty to the extent of Rs. 1,00,000/-, the assessee has preferred the present appeal.

4. Shri V. Sridharan, learned Senior Advocate appearing on behalf of the appellant has, though initially submitted that the ‘Guide Car’ shall not be classifiable under Chapter sub-heading 8603.00, but it shall be classifiable under Chapter sub-heading 8428.90, however considering the fact that in the case of very supplier and with respect to very supply of ‘Guide Car’, the appropriate authority classified ‘Guide Car’ under Chapter sub-heading 8603.00, learned Senior Advocate appearing on behalf of the appellant has fairly not pressed the said submission. However, h