2010 (10) TMI 191 - HC - Central Excise

Cenvat Credit denial of credit Assessee did not submit the invoices along with their monthly return and details of the goods received and sold were not entered in RG 23D Register - Tribunal has held that there is no dispute regarding duty payment and use of goods in manufacture of final product and the credit has been denied only on the ground that necessary particulars were not mentioned in the invoices and the supplier, which issued those invoices, did not enter the particulars in their statutory records - appeal allowed in view of the amendment made in Rule 57G and the Board s Circular, which was issued in light of the amended rules - substantial questions of law in favour of the assessee and against the Revenue - Appeal dismissed

Issues Involved:
1. Whether the Appellate Tribunal acted according to law in allowing the appeal of the respondent.
2. Whether the Tribunal erred in misinterpreting and misapplying Notification No. 7/99-C.E. (N.T.) and Board's Circular No. 441/7/99-CX regarding Modvat credit on invalid documents.
3. Whether the Tribunal correctly allowed the Modvat Credit based on documents considered invalid and not genuine.

Detailed Analysis:

1. Tribunal's Adherence to Law in Allowing the Appeal:
The Tribunal allowed the respondent's appeal, noting that there was no dispute regarding duty payment and the use of goods in the final product. The Tribunal referenced an amendment in Rule 57G, applicable to pending cases, and a Board's circular which directed that Modvat credit should not be denied for minor procedural lapses if the inputs were duty-paid and used in the manufacture of the final product. The Tribunal set aside the impugned order and allowed the appeal based on these grounds.

2. Misinterpretation and Misapplication of Notification and Circular:
The appellant argued that the Tribunal misinterpreted the provisions of Rule 57G and the Board's Circular. The appellant emphasized that the documents submitted by the respondent were invalid as the supplier did not submit the subject invoices with their monthly return and did not enter the details in the RG-23D Register. The appellant relied on the Supreme Court decision in Mangalore Chemicals & Fertilizers Ltd. and the Delhi Tribunal decision in Tide Water Oil Co. to support their stance that procedural lapses should not be overlooked.

3. Validity and Genuineness of Documents for Modvat Credit:
The respondent countered that Modvat credit was denied solely due to procedural lapses by the input supplier. They argued that the show-cause notices did not dispute the payment of duty on the furnace oil or its receipt and use in manufacturing. The respondent highlighted that the amendment to Rule 57G and the Board's Circular mandated that credit should not be denied for minor procedural lapses if the documents contained essential details such as payment of duty, description of goods, and address of the factory. The respondent also argued that the procedural lapses were on the part of the supplier, and the department did not initiate proceedings against the supplier or join them as a party.

Findings and Conclusion:
The Tribunal found that the procedural lapses cited by the department were not part of the original show-cause notices, which only alleged tampering with the invoices. The Tribunal noted that the supplier's failure to enter details in the RG 23D Register was not a valid ground to deny Modvat credit to the respondent. The Tribunal relied on the Supreme Court decision in Gas Authority of India Ltd., emphasizing that show-cause notices form the foundation of the demand and must contain all allegations. The Tribunal concluded that the procedural lapses were not substantive conditions and should not disqualify the respondent from availing Modvat credit. The Tribunal upheld the amendment to Rule 57G and the Board's Circular, which directed that credit should not be denied for minor procedural lapses.

Judgment:
The High Court found no illegality, infirmity, or jurisdictional error in the Tribunal's decision. The substantial questions of law were answered in favor of the assessee and against the Revenue, leading to the dismissal of the appeal.

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