2010 (10) TMI 799 - HC - Central Excise

Cenvat credit - Modvat credit was denied to the assessee by the Joint Commissioner and confirmed by the Commissioner (Appeals) only on the basis of information furnished by the Superintendent, Central Office to the effect that the supplier did not submit the subject invoices along with their monthly return and details of the goods received and sold were not entered in RG 23D Register - 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. The appeal has been allowed in view of the amendment made in Rule 57G and the Board s Circular, which was issued in light of the amended rules, no illegality, infirmity or jurisdictional error committed by the Tribunal while passing the impugned order. We answer the substantial questions of law in favour of the assessee and against the Revenue, and dismiss the appeal accordingly.

Issues Involved:

1. Legality of the Appellate Tribunal's decision to allow the respondent's appeal.
2. Interpretation and application of Notification No.7/99-CE(NT) dated 9.2.1999 and Board's Circular No.441/7/99-CX dated 23.2.1999 concerning Modvat credit.
3. Validity and genuineness of the documents used by the respondent to claim Modvat credit.

Detailed Analysis:

1. Legality of the Appellate Tribunal's Decision:

The Revenue's appeal under Section 35-G of the Central Excise Act, 1944, questioned the Tribunal's decision to allow the respondent's appeal. The Tribunal had set aside the Commissioner (Appeals)'s order and allowed the respondent's appeal based on the amendment in Rule 57G and the Board's Circular. The Tribunal found no dispute regarding duty payment and goods used in the final product, thus allowing the appeal.

2. Interpretation and Application of Notification No.7/99-CE(NT) and Board's Circular No.441/7/99-CX:

The Revenue argued that the Tribunal misinterpreted and misapplied the Notification and Circular without appreciating the case facts. The Tribunal relied on the amendment in Rule 57G, which states that credit should not be denied if the documents contain details of payment of duty, description of goods, assessable value, and name and address of the factory. The Board's Circular directed the department to allow Modvat credit despite minor procedural lapses, provided the inputs were duty-paid and used in manufacturing the final product. The Tribunal's decision was based on these provisions, which were applicable to pending cases.

3. Validity and Genuineness of Documents:

The Revenue contended that the documents used by the respondent were invalid and not genuine, as the supplier did not submit the invoices with their monthly return, and the details were not entered in the RG-23D Register. The respondent argued that the credit was disallowed due to procedural lapses by the supplier and that there was no dispute regarding duty payment on the inputs or their use in manufacturing the final product. The show-cause notices only alleged that the invoices were improper due to handwritten/printed terms, not that the necessary particulars were missing or that the duty was unpaid.

Judgment:

The Court observed that the denial of credit was based on procedural lapses by the supplier, not on substantive grounds. The show-cause notices did not allege that the necessary particulars were missing or that the duty was unpaid. The Court referred to the Supreme Court's decision in Mangalore Chemicals and Fertilizers Ltd., which distinguished between procedural and substantive conditions. The Tribunal correctly applied the amended Rule 57G and the Board's Circular, which allowed credit despite procedural lapses if the duty was paid and the goods were used in manufacturing the final product.

The Court concluded that the Tribunal's decision had no illegality, infirmity, or jurisdictional error. The substantial questions of law were answered in favor of the respondent, and the appeal was dismissed.

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