COMMISSIONER OF CENTRAL EXCISE, BANGALORE Vs. KAILASH AUTO BUILDERS LTD.

JUDGEMENT

(1.) This reference is made to this Court by the Tribunal at the instance of the Revenue to consider the following question of law:

(2.) The assessee M/s Kailash Auto Builders Limited, are engaged in manufacture of motor vehicles for transport of goods falling under Chapter heading 8704 of CETA 1985. They have availed Modvat credit amounting to Rs. 1,29,044 in respect of capital goods received by them under Rule 57Q of the Central Excise Rules, 1944. The Assistant Commissioner who adjudicated the proceedings held that the assessee is manufacturing and clearing public transports falling under Chapter 8704.00 of the Schedule of the Central Excise Tariff Act, 1985 claiming exemption under Notification 162/86, dated 01.03.1985. The credit of duly paid on capital goods is admissible only when the capital goods are used in the manufacture of final products which are chargeable to Central Excise duty. In the instant case as the assessee is not manufacturing any final product which are cleared on payment of duty, he disallowed the credit of Rs. 1,29,044 and ordered recovery of the same.

(3.) Aggrieved by the same, the assessee preferred an appeal before the Commissioner of appeals. The Commissioner of appeals dismissed the appeal upholding the order of the Assessing Authority. Aggrieved by the same, the assessee preferred an appeal to the Tribunal. The Tribunal relying on the earlier order dated 30.10.2001 passed in the case of the very same assessee, held that the assessee has not utilized the credit of duty for clearing the exempted goods. They have claimed credit only in respect of excisable goods. Once credit on capital goods is availed the same could be made use of at the time of acquiring the excisable goods. Therefore the Tribunal set aside the order passed by the lower authorities and granted the benefit of availing the credit. Aggrieved by the said order, the present reference is filed.