2005 (12) TMI 112 - HC - Central Excise

Cenvat/Modvat - Duty paid on capital goods - declaration - Whether in the facts and circumstances of the case, keeping in view the provisions of Rule 57-T(3) of the Central Excise Rules, 1944, the Tribunal was justified in allowing the respondent to avail the modvat credit on ground of delayed filing of declaration ? - HELD THAT - The substantive requirement of availing MODVAT credit of Duty Paid on the inputs or capital goods received in factory is that such goods must have suffered excise duty required to be paid thereon. Payment of such excise duty must be evidencing by relevant document that inputs on which MODVAT credit can be availed under Rule 57-G or capital goods in respect of which MODVAT credit can be availed under Rule 57-Q or 57-R must be received in and used in the manufacturing of end products in the factory. If these conditions are fulfilled then procedural lapses on the part of the assessee in making of declaration or furnishing incomplete particulars should not come in the way of assessee in availing MODVAT benefit is clear intent of insertion of sub-rule 13 with effect from 9-2-99. Our above conclusion is also fortified with the contemporaneous circular issued by the Central Board of Excise Customs which clearly says that merely procedural lapses be not allowed to defeat the modvat credit benefit, if substantive conditions about payment of Duty and user of goods in manufacture of end product in factory are fulfilled. In the present case as per finding reached there is no complaint that assessee manufacturer has not satisfied the said substantive conditions for availing the MODVAT credit but only lapse alleged is filing of delayed declaration. Thus, conclusion reached by the Tribunal with aid of sub-rule (13) of Rule 57-T that this lapse cannot disentitle the manufacturer from availing Modvat credit does not require any interference. The appeal fails and is hereby dismissed.

Summary

Issues Involved:
1. Justification for allowing MODVAT credit despite delayed filing of declaration under Rule 57-T(3) of the Central Excise Rules, 1944.

Issue-wise Analysis:

1. Justification for allowing MODVAT credit despite delayed filing of declaration under Rule 57-T(3) of the Central Excise Rules, 1944:

The core issue addressed in the judgment is whether the Customs, Excise and Service Tax Appellate Tribunal was justified in permitting the respondent to avail MODVAT credit despite the delayed filing of the declaration required under Rule 57-T(3) of the Central Excise Rules, 1944.

Facts:
The respondent availed MODVAT credit on duty paid for capital goods received in the factory, as per Rule 57-Q. However, the required declaration under Rule 57-T(1) was filed three months late, beyond the stipulated period. The goods were received on 31st March 2000, but the declaration was filed on 12th July 2000.

Rule 57-T(1) and (3):
Rule 57-T(1) requires manufacturers intending to take credit on capital goods to file a declaration with the Assistant Commissioner before receiving the goods. Rule 57-T(3) allows for delayed declarations within one month or, in exceptional cases, within an additional two months, provided sufficient cause is shown.

Notification No. 7/99 C.E.(N.T.):
This notification introduced sub-rule (13) to Rule 57-T, which states that credit shall not be denied on the grounds of procedural lapses such as incomplete documents or declarations, provided the Assistant Commissioner is satisfied that duty has been paid and the goods are used in manufacturing.

Arguments:
The respondent argued that the procedural requirement of timely filing declarations should not override the substantive right to MODVAT credit, especially when the duty-paid goods were received and used in manufacturing. The appellant (Revenue) contended that the declarations filed after three months should render the MODVAT credit invalid, justifying the show cause notice and subsequent withdrawal of the credit.

Tribunal's Decision:
The Tribunal allowed the respondent to retain the MODVAT credit, emphasizing that procedural lapses should not negate the substantive entitlement to credit, especially when duty payment and usage conditions are met.

Court's Analysis:
The court examined the interplay between procedural and substantive requirements under the MODVAT scheme. It highlighted that Rule 57-T(13) and the related circular from the Central Board of Excise & Customs (dated 23rd February 1999) indicate a legislative intent to prioritize substantive compliance (duty payment and usage in manufacturing) over procedural lapses (timely filing of declarations).

Conclusion:
The court concluded that the procedural lapse of delayed declaration filing should not disentitle the manufacturer from availing MODVAT credit if the substantive conditions are satisfied. The Tribunal's decision to allow the credit was upheld, and the appeal was dismissed.

Final Order:
The appeal was dismissed, affirming the Tribunal's decision that procedural lapses in filing declarations should not prevent the respondent from availing MODVAT credit, provided the substantive conditions of duty payment and usage in manufacturing are met.