2001 (12) TMI 753 - AT - Central Excise

Summary

Issues:
1. Availment and reversal of Modvat credits on imported goods.
2. Correctness of the reversal of credit and payment of duty.
3. Compliance with Rule 226 of the Central Excise Rules regarding maintenance of account books.
4. Debit entries in RG 23A and PLA accounts and their correction.
5. Alignment of Customs Tariff with Central Excise Tariff and denial of Modvat credit.
6. Denial of credit by lower appellate authority and examination of eligibility of inputs.

Analysis:

1. The appellant availed Modvat credits on imported goods during a specific period and later reversed these credits in RG 32A and by entry in PLA. Subsequently, they requested the cancellation of the debit entries, stating that the reversal of credit and payment of duty were not correct. The Commissioner noted discrepancies in the appellant's actions and the prescribed procedure for recrediting the Modvat credit. The Commissioner upheld the Order-in-Original, rejecting the appeal.

2. Rule 226 of the Central Excise Rules imposes an obligation on the assessee to maintain account books properly. The appellant approached Range officers to correct entries in RG 23A and PLA accounts. However, the appellant claimed that no action was taken on their request. A notice was issued but settled after verification revealed no cancelled debit entry. Debit entries made without proper authorization are impermissible and must be corrected according to the law.

3. The Customs Tariff not aligning completely with the Central Excise Tariff can lead to differences in Tariff Headings. The Audit Department's objections to debit and reversal entries did not provide valid reasons for denying Modvat credit. Proper notice with reasons should precede any denial of credit, following the Central Excise Act and Rules. The Asstt. Collector's order lacked a decision on the eligibility of credit for inputs with mismatched Tariff Headings, necessitating further examination.

4. The appellate authority's denial of credit was deemed a misdirection of legal procedure. The matter was remanded to the Jurisdictional Range Superintendent to evaluate the eligibility of inputs for credit. If satisfied, the Superintendent was to permit corrections in RG 23A and PLA accounts, granting consequential benefits if applicable. The appeal was allowed on these grounds.