2006 (12) TMI 381 - AT - Central Excise

Appellants succeed in tax credit dispute due to procedural errors and time limitations

The judgment favored the appellants, highlighting the procedural nature of the lapse in availing Modvat credit on Capital Goods, the time-barred Show ... Demand and penalty - Cenvat/Modvat Issues:1. Irregular availing of Modvat credit on Capital Goods.2. Procedural lapse leading to interchange of electric motors in an Integrated Steel Plant.3. Justification of denial of Modvat credit by the department.4. Legality of Show Cause Notice issued after a considerable lapse of time.Analysis:Issue 1: Irregular availing of Modvat credit on Capital GoodsThe appeals arose from the Revenue's contention that the appellants irregularly availed Modvat credit on Capital Goods, leading to the confirmation of duty and imposition of penalties. The appellants had set up two units managed by separate entities but with a common Contractor. Due to clerical errors, electric motors meant for one unit were sent to the other, although the motors' value and capacity were the same. The Revenue denied Modvat credit and imposed penalties due to this procedural error.Issue 2: Procedural lapse with electric motors in Integrated Steel PlantThe Chartered Accountant argued that the interchange of electric motors was a procedural lapse, not a case of irregular availment where duty was not discharged. The motors' installation was certified, and the mistake was due to a printing error in the invoices. The Tribunal remanded the case for reconsideration, and the original authority accepted most contentions but upheld the demand regarding the six motors. The Judge found the mistake condonable as a procedural lapse, citing precedents, and noted that the Show Cause Notice issued after a significant time lapse was time-barred.Issue 3: Justification of denial of Modvat creditThe department defended the denial of Modvat credit, arguing that discrepancies in documents justified the decision. However, the Judge found that the value and duty payable on the motors were the same, and the error was procedural, warranting condonation. The installation certificates and documentation supported the appellants' case, leading to the allowance of the appeals.Issue 4: Legality of Show Cause Notice after a time lapseThe Judge observed that the Show Cause Notice originally demanded a substantial sum, but after reconsideration, most demands were dropped except for the electric motors issue. Given the procedural nature of the mistake and the time-barred Notice, the Judge ruled in favor of the appellants, allowing the appeals with consequential relief.In conclusion, the judgment favored the appellants, emphasizing the procedural nature of the lapse, the time-barred Show Cause Notice, and the condonable nature of the error in availing Modvat credit on Capital Goods.