1998 (6) TMI 316 - AT - Central Excise

Tribunal grants Modvat credit despite minor discrepancies, emphasizing fair treatment for manufacturers

TATA IRON AND STEEL CO. LTD. Versus COMMR. OF C. EX., JAMSHEDPUR

TATA IRON AND STEEL CO. LTD. Versus COMMR. OF C. EX., JAMSHEDPUR - 1999 (112) E.L.T. 612 (Tribunal) Issues:Entitlement to Modvat credit on inputs, Declaration under Rule 57G, Discrepancy in description of inputs, Denial of Modvat credit based on minor variation in description, Benefit of Modvat credit in case of imprecise declaration.Entitlement to Modvat credit on inputs:The main issue in the judgment was whether the appellants were entitled to the benefit of Modvat credit on inputs during specific periods. The appellant contended that despite minor variations in the description of inputs received and declared, they should not be denied the Modvat credit. The advocate argued that the Modvat credit should not be disallowed based on technical discrepancies as long as the inputs were used for the final products. The Tribunal agreed that the Modvat provisions are beneficial and should not be denied based on hyper-technical requirements. The judgment emphasized that the purpose of filing a declaration under Rule 57G is to inform the Department about the inputs used and the intention to avail Modvat credit.Declaration under Rule 57G:The appellant had filed a declaration under Rule 57G in 1988, declaring the input as 'ball bearing steel rounds.' However, the duty paying documents described the inputs differently. The Department raised a show cause notice based on this discrepancy, leading to the disallowance of Modvat credit. The advocate argued that the minor variation in the tariff description should not be a basis for denying the Modvat credit. The Tribunal noted that the declaration had been allowed to operate for six years before the objection was raised, and the Department had been aware of the inputs being used.Discrepancy in description of inputs:The discrepancy arose from the difference in the description of inputs between the declaration and the duty paying documents. The duty paying documents described the inputs as bars or rods of other alloy steel round, while the declaration mentioned 'ball bearing steel rounds.' The respondent argued that the inputs fell under different sub-headings, but the Tribunal observed that both types of inputs were classified under Chapter 72 and used for the final products. The judgment highlighted that the manufacturer did not gain anything by not making a proper declaration and that the inputs were duly paid for and utilized in the final products.Denial of Modvat credit based on minor variation in description:The respondent contended that the declaration should be concise and specific, covering the exact inputs in question. However, the Tribunal emphasized that denying Modvat credit based on minor discrepancies in the description would be penalizing the manufacturer without any fault on their part. The judgment cited previous decisions to support the argument that the benefit of Modvat credit should not be denied due to technicalities when the inputs were used in the final products and duty was paid.Benefit of Modvat credit in case of imprecise declaration:The Tribunal concluded that the benefit of Modvat credit should be extended to the appellants, even if the declaration was not deemed precise and specific by the Department. The judgment emphasized that as long as the inputs were duty-paid and used in the final product, the appellants should not be deprived of the Modvat credit. The Tribunal set aside the impugned orders and allowed the appeals, providing consequential reliefs to the appellants.By considering the submissions from both sides, the Tribunal ruled in favor of the appellants, emphasizing the beneficial nature of Modvat provisions and the importance of not penalizing manufacturers for minor discrepancies in documentation when the inputs were legitimately used in the final products.