Central Excise Rules- Assessee Not Entitled To Modvat Credit On 'Guide Cars' Treating It As 'Components' Of Coke Oven Battery: SC

The Supreme Court has observed that 'Guide Car' which is used for transporting hot coke, is a different equipment distinct from the Coke Oven Battery and cannot be considered to be a part of the Coke Oven Battery.

The Bench of Justice MR Shah and Justice Krishna Murari observed thus "Considering the process and the manner in which and/or for the purpose for which the 'Guide Car' is used, by no stretch of imagination, it can be said to be a 'component' of Coke Oven Battery. It cannot be said that without the 'Guide Car' the Coke Oven Battery shall not be functional."

Therefore, the Court has held that assessee is not entitled to Modvat credit under Rule 57Q of the Central Excise Rules 1944 on 'Guide Cars' treating the same as 'components' of Coke Oven Battery.

In this case, the appellant-assessee had approached Supreme Court after the Customs, Excise & Service Tax Appellate Tribunal had upheld the demand of Rs. 45,86,664 and reduced the penalty to Rs. 1,00,000/- holding that the appellant was not eligible for the duty credit in respect of the 'Guide Car'. The appellant had claimed the Modvat credit under Rule 57Q of the Rules 1944 on 'Guide Car'.

Senior Advocate V. Sridharan appeared for the Appellant-assessee whereas Advocate V. Chandrashekara Bharati appeared for Respondent-Revenue.

The Court held that "'Guide Car' can be said to be a different equipment distinct from the Coke Oven Battery and cannot be considered to be a part of the Coke Oven Battery. In that view of the matter, the appellant shall not be entitled to the Modvat credit on 'Guide Car' as 'component' and/or part of Coke Oven Battery as claimed by the appellant."

However, the Court noted that the appellant-assessee had bonafidely believed that the goods would fall under Chapter sub-heading 8428.90 and/or that the 'Guide Car' can be said to be a 'component' of the Coke Oven Battery. Therefore, the Court held that the order of penalty of Rs.1,00,000/- imposed by the Tribunal is required to be quashed and set aside.

"The present appeal is dismissed so far as the confirmation of demand of Modvat credit availed by the appellant on 'Guide Car'. However, the order of penalty imposed by the Adjudicating Authority, modified by the learned Tribunal to Rs. 1,00,000/- is hereby quashed and set aside.", the Court concluded.

Cause Title- M/s Steel Authority of India Limited v. Commissioner, Central Excise & Customs, Bhubaneswar

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