2002 (8) TMI 605 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit by the Commissioner (Appeals).
2. Eligibility of credit for inputs used in intermediate products received by job workers.
3. Compliance with Rule 57J and Notification No. 214/86-C.E.

Analysis:

Issue 1: Disallowance of Modvat Credit
The Revenue appealed against the Commissioner (Appeals) order setting aside the disallowance of Modvat credit availed by the Respondents. The dispute arose from the failure of job workers to meet the conditions under Rule 57J, specifically related to availing the benefit of exemption under Notification No. 214/86-C.E. The Commissioner (Appeals) did not provide findings on this crucial issue, leading to the appeal.

Issue 2: Eligibility of Credit for Inputs Used by Job Workers
The case involved M/s. Nestle India Ltd., availing Modvat credit on inputs supplied by M/s. Mandakini Agencies through job workers M/s. Kamet Plastics Ltd., and M/s. Amruta Moulding Pvt. Ltd. The Assistant Commissioner disallowed the credit, citing non-compliance with Rule 57J due to the job workers not availing the exemption under Notification No. 214/86. However, the Commissioner (Appeals) overturned this decision, emphasizing that since the job workers paid duty on the value of inputs, the credit availed by M/s. Nestle India was deemed correct.

Issue 3: Compliance with Rule 57J and Notification No. 214/86-C.E.
The Appellate Tribunal examined the procedural compliance required under Rule 57J and Notification No. 214/86-C.E. The Tribunal noted that the procedure outlined in the notification was not followed, as highlighted by the Departmental Representative. Despite the procedural breach, the Tribunal held that the substantial benefit of credit should not be denied if the entity is otherwise eligible. The Tribunal distinguished between procedural non-compliance and penal consequences, indicating that while penal liabilities could be imposed for procedural breaches, no such penalties were invoked in this case. Consequently, the Tribunal dismissed the Revenue's appeal, finding no merit in their arguments.

In conclusion, the Appellate Tribunal upheld the Commissioner (Appeals) decision to allow the Modvat credit availed by M/s. Nestle India Ltd., emphasizing the importance of compliance with procedural requirements under Rule 57J and relevant notifications while distinguishing between eligibility for credit and penal consequences for non-compliance.