1995 (4) TMI 178 - AT - Central Excise

Tribunal Upholds Denial of Modvat Credit & Penalty, Disagrees on Credit Restoration

The Tribunal upheld the denial of Modvat credit and penalty imposition due to the appellant's use of credit for a product different from the declared ... Modvat Scheme - Declaration Issues:1. Denial of Modvat credit and imposition of penalty under Rule 173Q of Central Excise Rules, 1944.2. Interpretation of relevant statutory provisions regarding utilisation of Modvat credit for payment of duty.3. Dispute over declared final product and utilisation of Modvat credit for a different product.4. Restoration of Modvat credit in R.G. 23A account after payment of duty from P.L.A.Analysis:Issue 1: The appeal challenged the denial of Modvat credit of Rs. 1,11,153.49 and the imposition of a penalty of Rs. 25,000 under Rule 173Q. The Additional Collector held that the appellant wrongly availed credit by using it for a product different from the declared final product. The period in question was January 1990 to June 1990, with a show cause notice issued on 11-7-1990.Issue 2: The advocate for the appellant argued that the Modvat credit availed was legitimate, citing Tribunal decisions that supported their position. They contended that wire rod conversion did not entail a manufacturing process, and technical lapses should not bar credit availment, as seen in previous rulings.Issue 3: The Departmental Representative countered that the appellant used Modvat credit for bare copper wire, not the declared enamelled copper wire, which are classified differently. They emphasized that Modvat credit cannot be used for an undeclared final product, urging dismissal of the appeal.Issue 4: The Tribunal analyzed the relevant statutory provisions, particularly Rule 57F(3), to determine the validity of Modvat credit utilisation. Emphasizing the importance of accurate declarations under Rule 57G, the Tribunal noted previous cases where the Supreme Court upheld the necessity of specific descriptions. The Tribunal found the appellant's declaration of enamelled copper wire as the final product, while using credit for bare copper wire, to be a substantive issue, not merely a technical lapse.Final Decision: The Tribunal upheld the denial of Modvat credit and penalty imposition, as the appellant utilized credit for a product different from the declared final product. However, the Tribunal disagreed with the denial of credit restoration in the R.G. 23A account after payment from P.L.A., stating that once the credit is restored, its proper utilization for eligible final products should not be objected to, except in cases of duty exemption or nil rates.In conclusion, the appeal was disposed of with the above considerations, maintaining the denial of credit but allowing for the restoration of credit in the R.G. 23A account after payment of duty from P.L.A.