2005 (8) TMI 593 - AT - Central Excise

Summary

Issues:
1. Denial of credit under Modvat Rules for procurement of steel sheets.
2. Discrepancy in description of goods in documents and actual goods supplied.
3. Conversion of CR Coils into sheets and its implications under Central Excise Law.
4. Imposition of penalty under rule 173Q(bb) of Central Excise Rules.

Issue 1: Denial of credit under Modvat Rules for procurement of steel sheets:
The appellants, engaged in manufacturing excisable goods, procured steel sheets and availed credit under the Modvat Rules for duty discharged on such sheets. However, objections were raised regarding the credit availed based on discrepancies in the description of goods in documents and the actual goods supplied. The documents mentioned duty-paid goods as CR Coils, but the goods received by the appellants were sheets, leading to the denial of credit and imposition of penalties under rule 173Q(bb) of the Central Excise Rules.

Issue 2: Discrepancy in description of goods in documents and actual goods supplied:
The Anti Evasion officers contended that the conversion of CR Coils into sheets required the use of Slitters/Cutting machines, which led to the loss of identification of CR Coils and made it impossible to correlate the sheets produced with the original Coils. The invoices did not reflect the conversion process, raising concerns under the Central Excise Law regarding the classification of the conversion process as manufacturing. However, based on previous Tribunal decisions and settled law, it was established that such decoiling of Steel Coils and Slitting/Cutting into sheets did not amount to manufacturing, leading to the reversal of credit denial and penalties.

Issue 3: Conversion of CR Coils into sheets and its implications under Central Excise Law:
The Tribunal decision clarified that the conversion of CR Coils into sheets through decoiling and cutting did not constitute manufacturing, thereby upholding the appellants' eligibility for Modvat Credit based on documents showing HR/CR Coils, even if sheets were received/supplied from the slitters. The Tribunal relied on previous decisions to support the appellants' position, concluding that the orders of credit reversal and penalties could not be sustained.

Issue 4: Imposition of penalty under rule 173Q(bb) of Central Excise Rules:
The imposition of penalties under rule 173Q(bb) on Registered dealers was deemed unjustifiable, leading to the setting aside of the order and allowing the appeals. The Tribunal's decision on this matter was pronounced in court on 25-8-2005, providing relief to the appellants and establishing the legal precedent regarding the classification of the conversion process and the eligibility for Modvat Credit in similar cases.