Tribunal overturns denial of Modvat credit and penalty for irregular credit on Tin Sheets

EMCEE CROWN CORKS (P) LTD. Versus COMMISSIONER OF C. EX., BANGALORE

EMCEE CROWN CORKS (P) LTD. Versus COMMISSIONER OF C. EX., BANGALORE - 2002 (149) E.L.T. 639 (Tri. - Bang.) Issues involved:
The issues involved in the judgment are the irregular availing of Modvat credit on Electrolytic Tin Sheets, failure to follow the prescribed procedure under Rule 57F(3), denial of credit and imposition of penalty under Rule 173Q(1).

Summary:

Irregular Availing of Modvat Credit:
The appellants were engaged in manufacturing 'Crown Corks' and filed declarations for Modvat credit on Electrolytic Tin Sheets processed by job workers. The tin sheets were sent for printing to a job worker without following the prescribed procedure under Rule 57F(3) during a specific period. A show cause notice was issued, denying the irregularly availed Modvat credit and proposing a penalty under Rule 173Q(1).

Denial of Credit and Imposition of Penalty:
The Commissioner found that the inputs were not received in the factory as per evidence, no records were maintained to evidence input receipts, and the processed tin plates had undergone various processes, leading to the loss of identity. Consequently, credit amounts were denied, and a penalty of Rs. 5 lakhs was imposed under Rule 173Q(1).

Tribunal's Decision:
Upon hearing both sides, the Tribunal found that the provisions of Rule 57J and Notification No. 351/86-C.E. were applicable in the case. The Tribunal referred to a previous case where non-compliance with Notification No. 351/86 was considered a procedural infraction, not warranting credit denial. The Tribunal also noted that the inputs sent for job work, even if altered, did not debar credit availment. Moreover, the Tribunal found no reason to deny credits or impose a penalty, as the proceedings lacked examination of relevant rules and notifications.

Conclusion:
The Tribunal set aside the order, allowing the appeals based on the findings that the denial of credit and penalty imposition were unwarranted due to misdirection in the proceedings and failure to consider the applicable rules and notifications.