2000 (4) TMI 223 - AT - Central Excise

Court allows Modvat credit despite procedural lapses, emphasizing substantive benefits and rejecting Revenue's appeal.

The court affirmed the decision to condone procedural lapses and allow Modvat credit on defective goods returned by a customer based on a Rule 57E ... Modvat Issues: Revenue appeal against condonation of procedural lapses for Modvat credit on defective goods returned by customer based on Rule 57E certificate instead of Rule 57F procedure.Analysis:1. The Revenue appealed against the condonation of procedural lapses by the ld. Commissioner (Appeals) to allow Modvat credit on defective goods returned by a customer based on a Rule 57E certificate instead of following the Rule 57F procedure.2. The facts presented were that the goods were rejected by the customer due to quality constraints and returned without any duty paying documents. The proper procedure would have been to clear the goods under Rule 57F on an invoice paying the same duty amount, but a certificate under Rule 57E was issued by the Superintendent instead. The Revenue contended that the certificate did not constitute a valid duty paying document and the procedure followed was beyond the scope of Rule 57F.3. The Manager for the respondents argued that the procedural irregularity should not be held against them as the goods had borne duty when initially cleared to the customer. The Tribunal had previously ruled that when duty payment on goods is established, procedural considerations should not hinder the recipients from taking credit. The Manager requested the Tribunal to dismiss the Revenue's appeal based on this principle.4. After considering the submissions and records, the Judge found that the goods had borne duty when initially cleared, and the duty burden was not vacated upon return. Although the customer did not follow the correct procedure under Rule 57F, the Judge agreed with the respondents that this constituted a procedural irregularity. The Judge noted that there was no fraud or duty evasion involved, and the returned goods were indeed duty paid.5. The Judge agreed with the ld. Commissioner (Appeals) who chose not to focus solely on procedural irregularity but took a broader and judicial view. The Judge emphasized that procedural irregularity should not prevent the recipients of duty-paid goods from availing the credit. Citing various Tribunal decisions, the Judge concluded that a broad and judicial view should be taken, allowing substantive benefits of Modvat to recipients of duty paying goods.6. Ultimately, the Judge found no significant error or irregularity in the order-in-appeal that warranted interference. Consequently, the Revenue's appeal was rejected, affirming the decision to condone the procedural lapses and allow the Modvat credit on the returned defective goods based on the Rule 57E certificate.