CEA No.26 of 2009 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CEA No.26 of 2009 DATE OF DECISION: February 18, 2010 COMMISSIONER OF CENTRAL EXCISE, ...APPELLANT COMMISSIONERARE JALANDHAR VERSUS M/S INTERNATIONAL TRACTORS LTD. ...RESPONDENT VILLAGE CHAK GUJRAN, HOSHIARPUR CORAM: HON'BLE MR. JUSTICE ASHUTOSH MOHUNTA. HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR. PRESENT: MR. KAMAL SEHGAL, SR.STANDING COUNSEL FOR THE APPELLANT. NONE FOR THE RESPONDENT. ASHUTOSH MOHUNTA, J.(ORAL) The Revenue has impugned the order dated 14.7.2008, (Annexure P-3) passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (for short 'the Tribunal'), vide which the respondent has been allowed Modvat credit on the packing material used by them in packing the spare-parts of tractors. The respondent is manufacturer of tractors and tractor components falling under Chapter 87 & 84 of the First Schedule to Central Excise Tariff Act, 1985. The components manufactured by the respondent are duly packed in boxes and thereafter are sold. The Tribunal has allowed credit of Rs.6.25 lacs on the goods of full packing of boxes. It has been observed by the Tribunal that duty was paid on the boxes. CEA No.26 of 2009 -2- This Court while admitting the appeal framed the following questions of law:- “(1) Whether the Hon'ble CESTAT can allow availment of Cenvat credit in respect of duty paid packing material which was not received by the Respondent alongwith the inputs? (2) Whether the Hon'ble CESTAT is right in reducing the penalty to Rs.20,000/- whereas Section 11AC of the Act mandates equal penalty?” Mr. Kamal Sehgal, counsel for the Revenue has argued that the respondent never received inputs in the packing of boxes and infact the goods were delivered to the respondent in pallets and hence, the respondent was not entitled to any credit. A perusal of the impugned order passed by the Tribunal shows that duty was paid by the suppliers on the goods inclusive of full packing of boxes. As duty was paid, hence the respondent was entitled to claim modvat credit on the packing material. It is not case where the duty was payable, but infact the duty had not been paid. As the duty was paid on the packing material, therefore, the respondent was entitled to claim Modvat credit. In view of the above, it is held that CESTAT could allow availment of Cenvat credit in respect of duty paid on the packing material. This question is accordingly answered in favour of the assessee and against the Revenue. The Tribunal was right in reducing the penalty and this question is also answered against the Revenue. CEA No.26 of 2009 -3- Resultantly, the appeal is dismissed being devoid of merits. (ASHUTOSH MOHUNTA) JUDGE February 18, 2010 (MEHINDER SINGH SULLAR) Gulati JUDGE