2008 (9) TMI 645 - AT - Central Excise

Cenvat/Modvat - Documents for taking credit - Held that - It is well settled that in the absence of any doubt about the duty paid character of the inputs that received in the factory and their utilization in the manufacture of final products cleared on payment of duty the denial of credit on the technical and procedural grounds is not called for - there is no justification for denial of credit or for imposition of penalty - appeal allowed - decided in favor of appellant.

Summary

Issues:
Recovery of Modvat credit and penalties imposed on the company, Commercial Manager, and Company Secretary for diversion of imported goods without proper endorsement on Bills of Entry.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Ahmedabad involved the recovery of Modvat credit and penalties imposed on the appellant-company, Commercial Manager, and Company Secretary. The Commissioner's order demanded the recovery of Modvat credit amounting to Rs. 31,78,315/- and imposed penalties on the company and its officials. The dispute arose when M/s. Godfrey Phillips imported goods under Chapter 48 of the Customs Tariff, which were later diverted to the appellant-company for which Modvat credit was claimed. The Department contended that the absence of an endorsement by the appraiser on the Bills of Entry regarding the diversion of goods violated Public Notice No. 32/99, leading to the denial of credit and imposition of penalties.

Upon considering the arguments, the Tribunal observed that the duty paid character of the imported goods was not in question, and there was acknowledgment that the goods reached the appellant's manufacturing unit after duty payment. It was emphasized that denying credit based on technical and procedural grounds when there was no doubt about the duty paid character of the inputs was unwarranted. Referring to a previous judgment, the Tribunal highlighted that the Revenue's focus should be on making the scheme effective rather than penalizing for technical breaches. Consequently, the Tribunal set aside the impugned order, allowing all appeals and providing relief to the appellants.

The Tribunal's decision was based on the principle that denial of credit and imposition of penalties should not occur when the duty paid character of goods and their utilization in manufacturing final products were evident. The judgment emphasized the need to uphold the effectiveness of the scheme and avoid denying beneficial provisions due to technicalities. As a result, the Tribunal overturned the Commissioner's order, granting relief to the appellants and nullifying the penalties imposed.

Additionally, since the appeals were allowed on merit, the Tribunal did not delve into the alternative plea of limitation, focusing solely on the substantive issues raised regarding the denial of Modvat credit and penalties. The judgment was pronounced in open court, concluding the legal proceedings on the matter.