2003 (11) TMI 491 - AT - Central Excise

Summary

Issues Involved:
Manufacturer availed Modvat credit on coils instead of sheets, alleged non-compliance with Rule 57J, imposition of penalties on manufacturer and dealers under Rule 57-I and Rule 173Q(1)(bbb) respectively, applicability of previous binding decisions, correlation demonstration for credit allowance.

Analysis:
1. The manufacturer availed Modvat credit on coils instead of sheets for automobile components during 1995-96. The issue revolved around non-compliance with Rule 57J, leading to the imposition of a credit demand of Rs. 8,13,331.95 and penalties under Rule 57-I. The manufacturer lacked the facility to cut uncoil and split the coil after uncoiling, relying on dealers to provide coils or coils cut to size, which were then slit by uncoilers/cutters as per specifications.

2. Penalties were imposed on various dealers under Rule 173Q(1)(bbb) for supplying only coils without performing the splitting process. Some dealers had not provided statements, while in other cases, charges for alleged slitting were not received. The legal issue centered on the dealers' role in the process and their adherence to invoicing regulations.

3. The judgment referenced a two-member bench decision in the case of Dhimant Trading Co. & Ors. v. CCE, Mumbai, which was deemed applicable to the present case due to similar circumstances. The decision highlighted the importance of demonstrating correlation, as shown by the manufacturer's representative, to justify credit allowance. The ruling favored the manufacturer in Appeal No. E/2422 for a remand to re-examine the correlation.

4. Regarding the dealers, the judgment concluded that there was no basis for imposing penalties under Rule 173Q(1)(bbb) as the dealers had not willfully provided incorrect particulars in the invoices. Since the dealers had supplied coils as indicated in the documents, the penalties were set aside, and their appeals were allowed. The judgment emphasized the importance of adherence to procedural rules and the need for proper demonstration of correlation for credit eligibility.