2000 (11) TMI 180 - AT - Central Excise

Summary

Issues:
Classification of inputs for Modvat credit, imposition of penalty on appellants, responsibility for correct classification, denial of credit on inputs.

Analysis:
The case involved the classification of inputs for Modvat credit used in the manufacture of Aluminium Wire Rods, where the Departmental officers alleged that the inputs were wrongly classified. A show cause notice was issued for the period between 1-1-90 to 11-1-92, claiming that the Modvat availed was wrongly taken, and a demand was made under Rule 57-I, along with a penalty imposed on the appellants. The Collector did not penalize the suppliers, stating lack of evidence for willful misstatement. The appeal challenged this order.

During the proceedings, the appellants argued that there was no cause for penalty imposition since the misclassification was not deliberate to benefit them. They contended that the jurisdictional officers' classification should not be subject to review by officers overseeing the assessees. The appellants also raised the issue of limitation on the demand. The respondents supported the Collector's decision on confirming the demand and imposing the penalty.

The Tribunal examined Rule 57-G(2) (IVth Proviso), which requires manufacturers to ensure appropriate duty payment on acquired inputs. It was noted that the responsibility for correct classification lies with the officers controlling the factory of the input manufacturer, not the receiving manufacturer. Changing the classification approved by one Collector without authority was deemed incorrect. Since the suppliers were not penalized for wrong classification, the penalty on the appellants was questioned.

The Tribunal rejected the argument that the case was about denial of credit on undeclared inputs, emphasizing the charge in the show cause notice regarding misdeclaration of unwrought aluminum as aluminum plates. Consequently, the Tribunal held the impugned order unsustainable, setting it aside and allowing the appeal with any consequential relief due to the assessees.