2000 (5) TMI 1088 - AT - Central Excise

Summary

Issues:
Appeal against denial of Modvat credit under Rule 57GG.

Analysis:
The appeal was filed against the denial of Modvat credit amounting to Rs. 64,600 under Rule 57GG, which was upheld by the Commissioner (Appeals) in the Order-in-Appeal. The dispute revolved around the validity of the Modvat credit taken by the appellant on sugar purchased from a registered dealer who had allegedly wrongly claimed Modvat credit on original invoices instead of duplicate ones. The appellant argued that the original invoices issued by the sugar manufacturer did contain duty paying particulars, and the department had only penalized the registered dealer without reversing the credit in his account. The appellant contended that since the goods were received as per the prescribed invoices, denying them the credit would be unjust.

The appellant cited precedents, including the case of CCE, Jaipur Vs. Unichem Trading Co. (Pvt.) Ltd., where it was held that a procedural lapse should not result in the denial of substantive benefits like Modvat credit. The Tribunal emphasized that the absence of a duplicate invoice should not lead to disallowing the credit if the goods were duty paid and the substantive benefit was rightfully claimed. The appellant also referenced the case of Birla Ericsson Optical Ltd. Vs. CCE, where it was established that credit cannot be denied solely based on the dealer issuing invoices on the basis of invalid documents from the manufacturer.

The Department argued that the registered dealer did not have permission to claim credit on original invoices as per the Rules, making the subsequent credit taken by the appellant legally incorrect. However, the Tribunal noted that while the dealer was penalized for procedural lapses, the department did not instruct him to reverse the Modvat credit in his account. As the appellant had followed the prescribed procedure and the duty incidence had passed on to them, the Tribunal found no basis to deny the credit. Relying on the principles established in previous cases, the Tribunal set aside the Order-in-Appeal, along with the Order-in-Original, and allowed the appeal with consequential relief.