2016 (2) TMI 483 - AT - Central Excise

Modvat Credit denied - denial on the ground that the appellant have not filed 57T(1) declaration and 57T(2) intimation in the proper format - Held that - The allegation made in show cause notice is very vague as no description of capital goods was provided in the show cause notice, at the same time it is undisputed that the appellant had filed declaration in respect of various capital goods and spares. Unless the show cause notice specify particular capital goods, it cannot be ascertained in respect of which capital goods, the declaration was not filed. In absence of such description in the show cause notice, the show cause notice appears to have been issued on presumption/assumption only. In this fact, the demand of Modvat Credit cannot be sustained. Moreover the filing of declaration is a procedural requirement and for this lapse, substantial benefit of Modvat cannot be denied. In this regard Board Circular dated 09-02-1999 and 23-02-1999 clarified that due to said procedure lapse, Modvat credit cannot be denied which was further reinforced by Larger Bench in the case of Kamakhya Steels (P) Ltd. (2000 (8) TMI 113 - CEGAT, NEW DELHI ). In the case of A.B. Card Clothing (Pvt.) Ltd. (2006 (11) TMI 108 - HIGH COURT PUNJAB AND HARYANA ) held that for non-filing of declaration under Rule 57T, Modvat Credit cannot be denied. As regard receipt of Capital Goods and use thereof, there in no allegation in the show cause notice. - Decided in favour of assessee

Summary

Issues:
1. Denial of Modvat Credit due to non-filing of declaration under Rule 57T(1) and intimation under Rule 57T(2).

Analysis:
The judgment revolves around the denial of Modvat Credit to the appellant based on the grounds of not filing the required declaration and intimation under Rule 57T(1) and Rule 57T(2) of the erstwhile Central Excise Rules, 1944. The Ld. Counsel for the Appellant argued that they had indeed filed a declaration covering all capital goods and spare parts for which credit was availed during a specific period. He contended that the show cause notice lacked specific allegations regarding the non-filing of declarations for particular capital goods, suggesting it was based on assumption. The appellant highlighted that procedural lapses in filing declarations had been condoned by relevant Board Circulars and judicial precedents, emphasizing that substantial benefits like Modvat Credit should not be denied solely for procedural errors.

The Revenue, represented by the Ld. Asstt. Commissioner, stood by the findings of the impugned order, maintaining the denial of Modvat Credit. However, the Member (Judicial) carefully evaluated both sides' submissions and found that the lower authorities had disallowed the credit solely on the grounds of procedural lapses in filing declarations and intimations. The judgment emphasized that the show cause notice was vague and lacked specific descriptions of the capital goods in question, making it difficult to ascertain the exact non-compliance. It was noted that the filing of declarations was a procedural requirement, and the denial of Modvat Credit for such lapses was unwarranted, as clarified by relevant Board Circulars and judicial decisions, including the Larger Bench ruling in the case of Kamakhya Steels (P) Ltd. The judgment also referenced a High Court decision supporting the appellant's stance that Modvat Credit should not be denied solely for non-filing of declarations under Rule 57T.

Consequently, the judgment concluded that the impugned order was not sustainable due to the lack of specificity in the show cause notice and the procedural nature of the non-compliance. Therefore, the appeal was allowed, setting aside the earlier decision and ruling in favor of the appellant.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the legal principles applied, and the reasoning behind the decision to allow the appeal regarding the denial of Modvat Credit.