M/S STEEL AUTHORITY OF INDIA LIMITED versus COMMISSIONER, CENTRAL EXCISE & CUSTOMS, BHUBANESWAR

Citation: [2022] 12 S.C.R. 50 · Decided: 16-09-2022 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Case Partly allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 12 S.C.R.
M/S STEEL AUTHORITY OF INDIA LIMITED
v.
COMMISSIONER, CENTRAL EXCISE & CUSTOMS,
BHUBANESWAR
(Civil Appeal No. 7269 of 2009)
SEPTEMBER 16, 2022
[M. R. SHAH AND KRISHNA MURARI, JJ.]
Central Excise Rules, 1944 – r.57Q – Modvat credit on ‘Guide
Car’ claimed by the appellant-assessee – Tribunal upheld the
demand of Modvat credit availed by the appellant on ‘Guide Car’
holding that the appellant was not eligible for the duty credit in
respect of the ‘Guide Car’ – On appeal, held: Considering the
process and the manner in which and/or for the purpose for which
the ‘Guide Car’ is used, it cannot 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 – ‘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 – Thus, the appellant shall not be entitled to the Modvat
credit on ‘Guide Car’ as ‘component’ and/or part of Coke Oven
Battery as claimed – Adjudicating Authority and Tribunal rightly
confirmed the demand of Modvat credit availed by the appellant on
‘Guide Cars’ – However, the penalty was not justified at all –
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 – Therefore, the
order of penalty of Rs.1,00,000/- imposed by the Tribunal is set
aside.
Words & Phrases – ‘component’ – Meaning of – Discussed.
Partly allowing the appeal, the Court
HELD: 1.1 At the outset, it is required to be noted that in
the case of supplier, ‘Guide Car’ was classified under Chapter
sub-heading 8603.00. Classification of a product done at the
consignor’s end shall be final and that cannot be changed/
questioned at the consignee’s end. Therefore, ‘Guide Car’ shall
[2022] 12 S.C.R. 50
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be treated and/or considered as classifiable under Chapter sub-
heading 8603.00 of the tariff. The short question which is posed
for the consideration of this Court is, 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? The appellant has claimed the Modvat credit
under Rule 57Q of the Rules 1944 on ‘Guide Car’. As per Rule
57Q with respect to goods falling under Chapter 84 as mentioned
at serial No. 2 in the Table attached with the Schedule to the
Tariff, there shall be credit of duty paid on capital goods used by
the manufacturer. ‘Guide Car’ shall not fall under Chapter 84.
Therefore, it is the case on behalf of the appellant that it will fall
at serial No. 5 of the Table, namely, ‘components’. Therefore,
the short question which is posed for the consideration of this
Court is, whether ‘Guide Car’ can be said to be ‘component’ of
Coke Oven Battery as claimed by the appellant? [Paras 6, 6.1,
7][56-A-E; 57-B-C]
1.2 The test would be whether the ‘Guide Car’ can be said
to be an integral part necessary to the constitution of the whole
article, namely, Coke Oven Battery and whether without it, the
Coke Oven Battery shall not be complete? 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. The ‘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. The Adjudicating Authority as well
as the learned Tribunal have rightly confirmed the demand of
Modvat credit availed by the appellant on ‘Guide Cars’. [Paras
8, 9][58-G-H; 59-A-D]
1.3 However, at the same time and in the facts and
circumstances of the case, the penalty was not justified at all.
M/S STEEL AUTHORITY OF INDIA LIMITED v. COMMISSIONER,
CENTRAL EXCISE & CUSTOMS, B

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