2007 (11) TMI 223 - AT - Central Excise

Importance of Verifying Duty-Paid Goods for Modvat Credit: Court Emphasizes Compliance

SUKAM GRAVURES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-I

The court set aside the order denying modvat credit and imposing penalties, emphasizing the importance of verifying and utilizing duty-paid goods in ... Credit denied & penalties imposed on ground that invoice on the strength of which the credit was availed, was computer generated, & name of appellant was hand written - Circular 441/7/99-CX clarified that credit shall not be denied on procedural lapse if duty paid goods were used in the factory - assessee’s invoice contains the details viz description of the goods, AV, name & address of factory or warehouse where the goods are to be received - in view of this, denial of credit not sustainable Issues:1. Denial of modvat credit and imposition of penalties based on the nature of the invoice.Analysis:The appeal was filed against an order denying modvat credit and imposing penalties due to the nature of the invoice, where the appellant's name was handwritten on a computer-generated invoice. The appellant argued that there was no dispute regarding the receipt of goods, duty payment, and their use in the manufacturing process. They cited the amendment to Rule 57-G and T by Notification No.7/99, which clarified that credit should not be denied if all particulars are not mentioned in the document. Additionally, Circular No. 441/7/99-CX issued by the Board emphasized that credit should not be denied on procedural lapses if duty-paid goods were used in the factory, further supporting the appellant's contention.The revenue contended that the invoice, although computer-generated and typed, had the appellant's name handwritten on it, justifying the denial of credit. However, it was noted that duty-paid inputs were indeed received and used in the manufacturing process, which was undisputed. Rule 57-G was amended to specify that credit should not be denied solely based on incomplete document particulars. The Board's Circular further emphasized the importance of conducting inquiries to ensure the duty-paid nature of goods and proper utilization as per Modvat Rules before issuing show cause notices for procedural lapses.Considering the Board Circular and the fact that duty-paid inputs were received and used in the manufacturing process, the impugned order denying credit and imposing penalties was set aside. The appeal was allowed, highlighting the importance of proper verification and utilization of duty-paid goods in line with the relevant rules and circulars to avoid unnecessary litigation.