2012 (4) TMI 511 - AT - Central Excise

MODVAT Credit - when all other requirements are satisfied, whether the appellants can be denied the benefit of Modvat credit lying unutilized in the account of the company which merged with the appellants by the orders of the Hon ble High Court, only because of the appellants failure to file declaration under Rule 57H of the Central Excise Rules and adjusting the Modvat credit in the account of merged company without seeking approval from the Commissioner - Held that - this is a case of purely a technical lapse. Had the appellants submitted the declaration, obviously, they would have been granted approval to adjust the Modvat credit available in the account of M/s. Amar Polyfab P. Ltd. Not only this, the appellants had intimated the department promptly about the merger, they obtained an amended registration certificate and they also wrote a letter on 14-10-1994 requesting that the declarations, classification lists, price declarations and other documents filed by M/s. Amar Polyfab P. Ltd. may be treated as the declarations/documents filed by M/s. Indra Polyfab P. Ltd. w.e.f. 12-10-1994. Though above noted communication is not in the form prescribed under Rule 57H but it supplies all necessary information to the department. It is undisputed that adjustment of Modvat credit by M/s. Amar Polyfab P. Ltd. was done after 14-10-1994. Therefore, we are of the view that this is a case of technical lapse for which the appellants cannot be penalized - Decided in favour of assessee.

Summary

Issues:
1. Modvat credit utilization without filing declaration under Rule 57H of Central Excise Valuation Rules and approval from the competent authority.

Analysis:
The appeal was filed against the order of the Commissioner (Appeals) regarding the Modvat credit demand and penalty imposed on the appellants. The dispute arose from the merger of two companies, where Modvat credit of Rs. 6,35,398/- was available in the account of one company, which was utilized by the merged entity without filing a declaration under Rule 57H. The appellants argued that the failure to file the declaration was a technical lapse and should not invalidate the credit utilization.

The department contended that the Modvat credit should not have been used without compliance with Rule 57H and approval from the competent authority. The adjudicating authority confirmed the demand and imposed a penalty, which was partially upheld by the appellate authority.

The appellate tribunal analyzed the case and emphasized that the failure to file the declaration under Rule 57H was a technical lapse. The tribunal noted that the appellants promptly informed the department about the merger, obtained an amended registration certificate, and requested the transfer of documents from the merged company. The tribunal found that the communication provided necessary information, even though it did not strictly adhere to Rule 57H.

The tribunal referred to legal precedents, including judgments from the Hon'ble Madras High Court and the Tribunal, to support its decision. It concluded that the technical lapse in filing the declaration should not penalize the appellants, and therefore set aside the demand and penalty imposed by the lower authorities.

In the final judgment, the tribunal accepted the appeal, setting aside the demand of Rs. 6,35,398/- and the penalty. The decision was based on the view that the failure to file the declaration was a technical lapse that should not invalidate the appellants' right to utilize the Modvat credit available from the merged company.