1999 (2) TMI 216 - AT - Central Excise

Tribunal Overturns Decision on Modvat Credit Classification

PAHARPUR COOLING TOWERS LTD. Versus COMMISSIONER OF C. EX., CALCUTTA-I

PAHARPUR COOLING TOWERS LTD. Versus COMMISSIONER OF C. EX., CALCUTTA-I - 1999 (112) E.L.T. 921 (Tribunal) Issues: Disallowance of Modvat credit and penalty imposition based on incorrect classification of H.R. Sheets in invoice.Analysis:1. The impugned order disallowed Modvat credit of Rs. 15,408.93 and imposed a penalty of Rs. 2,000 due to the incorrect classification of H.R. Sheets in the invoice, showing sub-heading 7802.29 instead of the correct 7208.29.2. The appellants argued that they had correctly declared H.R. Sheets under Heading 7208.29 in their submission dated 25-8-1988. They claimed the incorrect sub-heading in the invoice was a clerical error, as H.R. Sheets do not fall under Heading 7802.29 which covers lead, waste, and scrap. However, the Assistant Collector and Commissioner (Appeals) rejected the Modvat credit based on the incorrect sub-heading.3. The Tribunal observed that the appellants had indeed declared the inputs as hot rolled under Heading 7208.29 in their submission. The misclassification in the invoice was deemed a mistake, especially since the correct heading was mentioned elsewhere in the same document. The Tribunal noted that all other Modvat credit conditions were met, and the denial based solely on a clerical error was unjustified.4. The Tribunal emphasized that the Modvat credit is a beneficial provision and should not be denied on minor grounds like a typographical mistake in the invoice. The appellants had even requested the return of the invoice for correction by the manufacturer, which was not accepted. The Tribunal found no valid reason to disallow the Modvat credit and overturned the impugned order, allowing the appeal without pre-deposit.5. The Tribunal distinguished the present case from previous judgments cited by the Respondent, noting that in those cases, the denial of Modvat credit was due to a lack of specific declaration, unlike the current scenario where a declaration existed, and the issue was a mere incorrect sub-heading in the invoice.6. Ultimately, the Tribunal set aside the impugned order, allowed the appeal, and granted the Stay Petition in favor of the appellants, emphasizing the importance of upholding the Modvat credit provisions and rectifying unjust denials based on minor errors.