2006 (8) TMI 67 - AT - Central Excise

Cenvat/Modvat - Transit sale - Registered dealer received CR Coils while manufacture availed benefit of credit on CR Sheets - Goods were duly duty paid and credit was availed on very goods which were cut into CR Sheets

Issues Involved:
1. Validity of Modvat credit availed based on invoices issued by registered dealers without the goods being stored in their registered premises.
2. Imposition of penalties and interest for alleged procedural lapses in availing Modvat credit.
3. Applicability of extended period of limitation due to alleged suppression of facts.

Detailed Analysis:

1. Validity of Modvat Credit:
The primary issue in these appeals revolves around whether Modvat credit can be availed based on invoices issued by registered dealers, even if the goods were not stored in their registered premises. The appellants, Standard Electricals Limited and Allied Steel, contended that the Modvat credit was correctly availed and that the procedural lapses should not invalidate the credit. They relied on various decisions of the Tribunal and Trade Notices which allowed for practical considerations in handling such goods.

The authorities found that "C.R. coils" were not unloaded at the registered premises of the dealer, M/s. Allied Steels, but were taken to the premises of RSD Steel Cutters for cutting into sheets. The invoices issued by the registered dealer described the goods as "C.R. coils" removed from their premises, which was factually incorrect. The authorities held that Modvatable invoices must be issued only for goods received in the registered premises, as per Board Circulars and the Supreme Court decision in Mihir Textiles Ltd. v. CCE.

2. Imposition of Penalties and Interest:
The appellants argued that penalties and interest should not be imposed as there was no intention to evade duty, and the goods were duty-paid. They cited several Tribunal decisions which emphasized that procedural lapses should not attract penalties if the substantive benefit of Modvat credit was otherwise due. The authorities, however, imposed penalties under Rule 173Q(l)(bb) and Rule 173Q(l)(bbb) read with Rule 209A, citing the procedural violations.

3. Applicability of Extended Period of Limitation:
The authorities invoked the extended period of limitation, alleging suppression of facts by the appellants. The appellants contended that there was no suppression of facts and that the extended period should not apply. They argued that the procedural lapses were bona fide and not intended to evade duty. The authorities, however, found that the appellants had suppressed the fact that the goods were received from premises other than the registered premises of the dealer.

Judgment:
The Tribunal found that the goods were duty-paid and the procedural lapses did not warrant denial of Modvat credit. It referred to Trade Notice No. 62/99, which allowed for practical difficulties faced by registered dealers of metal coils. The Tribunal held that the statutory requirement of governing the movement of duty-paid goods should not undermine the substantive benefit of Modvat credit. It emphasized that the identity of the goods was not in dispute, and the procedural lapses did not lead to any loss of duty to the exchequer.

The Tribunal set aside the impugned orders made in Excise Appeal Nos. 5172 and 5216 of 2004, granting consequential relief to the appellants. The order of the Commissioner (Appeals) in Excise Appeal No. 5215 of 2004 was also set aside to the extent it was made against the appellant. All three appeals were allowed, and the penalties and interest were quashed.

Conclusion:
The judgment underscores the principle that substantive compliance with the law should not be overshadowed by procedural lapses, especially when there is no loss of duty to the exchequer. The Tribunal's decision aligns with the practical realities of trade and provides relief to the appellants from undue penalties and interest.

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