CX - Since imported machine was damaged in transit & parts of same were replaced by fresh import of spares, credit proportionate to damaged parts is not available as same were not used: CESTAT
By TIOL News Service
MUMBAI, FEB 08, 2017: IN September 1998, the appellant availed MODVAT credit in respect of duty paid on imported horizontal cold chambers high-pressure die casting press machine.
The machine was found damaged in transit and the same could not be used and installed as such. Therefore, damaged parts of the machine were required to be replaced.
For repair of the machine, spares were imported in March and April 1999 and the countervailing duty paid thereon was availed as MODVAT credit.
In totality, the appellant had availed MODVAT credit of total CVD paid on the machine and also on the CVD paid on the spares imported subsequently for replacement in the damaged machine.
The department held the view that since the defective parts were not used, therefore, the credit equivalent to the CVD paid on the imported spares cannot be allowed. Support is also taken from the fact that the appellant had claimed insurance towards the damaged parts as well as damage to the machines.
The appellant is before the CESTAT.
It is submitted that since both the machine as well as the spares were received in the factory, the credit should be allowed; that insurance claim has no relevance to the claim of the MODVAT credit; that the fact of taking credit on machine as well as on spares was known to the department, therefore there is no suppression of fact. Support is also drawn from the decisions in DCW Ltd - 2004-TIOL-819-CESTAT-MAD and Midco Ltd - 2011-TIOL-990-CESTAT-AHM .
The AR reiterated the findings of the impugned order.
The Bench while distinguishing the case laws cited by the appellant observed –
Merits:
+ The machine before receipt got damaged and certain parts were totally damaged and its replacement as new parts were imported. Credit was taken on the CVD paid on entire machine including the damaged parts as well as CVD paid on spare parts imported subsequently.
+ In these fact the parts which got damaged and the same got removed and taken out and in place of the same new parts were fitted. Therefore, in the machine certain parts which were removed were not used in the machine. Therefore, the goods which were not used by the appellant credit of the same cannot be allowed.
+ As regards the subsequent import of the spare which were used for replacement credit is available for the simple reason that those parts were used in the capital goods which is for further manufacture of final products. For allowing the credit it is the primary condition that goods should be used in the factory of the manufacturer in or in relation to the manufacture of final product. It is undisputed that the parts which got damaged in the capital goods, the modvat credit proportionate to said damaged parts shall not be available to the appellant as the same were not used.
Limitation:
+ Commissioner(A) has in his findings mentioned that assessee has suppressed the fact by not informing the department that they have received the said machine in damaged condition and that the defective parts were never used; have neither informed that they have availed full credit on said machine after repairs/replacement of certain parts/components, nor they have informed that they have availed credit on that part of machine which was received in damaged condition and, therefore, not being used in the manufacture of final product; therefore, the extended period is rightly invokable along with penalty and interest.
Holding that there is no infirmity in the impugned order, the same was upheld and the appeal was dismissed.
In passing: Heads I win, tails you lose!
(See 2017-TIOL-348-CESTAT-MUM)
