Commissioner Vs Rajasthan Spinning & Weaving Mills Ltd (CESTAT Delhi)
The Revenue appealed against the order dated 04.02.2020 of the Commissioner (Appeals), which had set aside the adjudicating authority’s order disallowing MODVAT credit on components of DG sets.
The assessee, engaged in manufacturing yarn of synthetic and artificial staple fibres, had availed MODVAT credit on capital goods under Rule 57Q of the Central Excise Rules, 1944. It placed purchase orders for DG sets and their components, which were received in its factory on payment of duty and used for erection and commissioning of the DG sets. After erection, the DG sets were handed over to the assessee.
The Revenue contended that the DG sets were manufactured and commissioned by another entity, that such manufacture was exempt from duty, and that the supplier could not pass MODVAT credit to the assessee. A show cause notice dated 25.04.2003 proposed recovery of the credit under Section 11A(1) of the Central Excise Act, 1944 read with Rule 57U of the Central Excise Rules, 1944, along with interest and penalty. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) allowed the assessee’s appeal.
Before the Tribunal, the Revenue sought to distinguish earlier decisions relied upon by the assessee. The Tribunal examined those decisions, including the Supreme Court’s order in CCE, Chandigarh Vs. Ambuja Cement dated 08.09.2022, which held that DGPP sets formed part of the factory and qualified for MODVAT credit under Rule 57Q.
