Order date – 16 September 2022

Facts – 

• The Appellant, M/s Steel Authority of India Limited, were issued a show cause notice dated 09.05.2000 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.
• The Appellant contended 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.
• The Adjudicating Authority disallowed the credit amounting to Rs. 1,71,60,376/- which was alleged 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 also imposed the penalty of Rs. 5,00,000/- under Rule 173Q of the Rules 1944.
• Aggrieved, the appellant filed an appeal.

Issue – 

• Whether the appellant is entitled to Modvat credit under Rule 57Q of the Rules 1944 on ‘Guide Cars’ treating the same as ‘components’ of Coke Oven Battery, as claimed? 

Order – 

• The Apex Court observed that ‘Guide Car’ is being used for the purpose of transporting the hot coke after it is processed in the Coke Oven Battery. Therefore, ‘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. 
• Therefore, the court agreed with the adjudicating authorities but found that the penalty was not justified. The appellant 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. 
• The learned Tribunal has rightly confirmed the demand of Rs. 45,86,664/- being the Modvat credit availed by the appellant on ‘Guide Car’.
• Therefore, the demand was upheld and order of penalty was set aside.
• Appeal partly allowed.