2008 (2) TMI 99 - HC - Central Excise

Dept. allege that input unwrought aluminium has been mis-declared by assessee as aluminium plates to avail credit if assessee purchased goods on basis of approved gate passes in absence of any collusion between supplier & purchaser credit can t be denied when suppliers have been exonerated conceding any right as claimed by Dept would indirectly amount to allowing them to assail correctness of classification of concerned jurisdictional authorities who had duly certified the goods

Summary

Issues:
Department's claim of mis-declaration by the assessee as unwrought aluminium instead of aluminium plates for Modvat Credit.

Analysis:
The Department alleged that the assessee mis-declared unwrought aluminium as aluminium plates to claim Modvat Credit, leading to incorrect availing of central excise duty amounting to Rs. 65,44,206.90. The officers physically verified the inputs and found them to be unwrought aluminium, not fitting the definition of "aluminium plate" under the Central Excise Tariff Act, 1985. The Department conducted an inquiry, including a chemical examination, and concluded that the product received by the assessee was unwrought aluminium, not declared in their Modvat declaration. A show cause notice was issued, and the demand for central excise duty was confirmed against the assessee, along with a penalty under Rule 173Q(1)(bb).

The Customs, Excise & Gold (Control) Appellate Tribunal decided the appeal, noting the responsibility of jurisdictional officers to ensure proper classification of inputs. The Tribunal found that the Collector lacked authority to change the classification approved by another Collector. It held that the receiving manufacturer should not be solely responsible for correct classification, as it could lead to chaos. The Tribunal also observed that the Collector did not have grounds to impose a penalty since the supplier was not found to have willfully entered the wrong classification.

The High Court analyzed the submissions and orders, finding the Collector's findings contradictory. While the other parties were exonerated, the assessee was held liable based on the premise that they did not purchase the goods from those parties. The High Court disagreed, stating that if the suppliers and purchasers were not colluding, the assessee could not be denied Modvat credit. The Court emphasized that the requirement of Rule 57G(2) was sufficiently complied with if the goods were purchased based on approved gate passes.

The Court highlighted that the Department's argument based on subsequent chemical analysis was not sufficient to challenge the classification certified by jurisdictional authorities at the time of excise clearance. The Court concluded that no substantial question of law arose regarding the rate of excise duty, leading to the dismissal of the application.

In summary, the High Court dismissed the application, stating that no question of law necessitated adjudication, and each party was to bear its own costs.