2000 (9) TMI 189 - AT - Central Excise

Summary

Issues: Disallowance of Modvat credit, Delay in taking credit, Imposition of personal penalty, Applicability of Larger Bench decision

1. Disallowance of Modvat credit:
The appellate tribunal addressed the disallowance of Modvat credit amounting to Rs. 16,80,000 by the authorities due to the credit being taken after a period of six months from the date of issuance of Invoice-cum-Despatch advices by M/s. Bokaro Steel Plant. The goods were received by the appellants in December 1993 but were not entered into RG 23A Part I until January 1994, almost a year later. The authorities rejected the Modvat credit and imposed a personal penalty of Rs. 10,000 on the appellants.

2. Delay in taking credit:
The appellants argued that the delay in taking the Modvat credit was due to the nature of their integrated steel plant operations, where raw materials arrived in large quantities through railway wagons. Sometimes, these wagons were misdelivered to other units, causing delays in reconciliation. Despite informing the Revenue about the misdirected wagons, Modvat credit was taken only after the reconciliation process was completed. The appellants contended that the delay was not their fault, as the inputs were received and utilized in the manufacturing process.

3. Applicability of Larger Bench decision:
The appellants cited a Larger Bench decision in the case of Kusum Ingots, arguing that it was not applicable to their case. The decision in question dealt with the denial of credit after an amendment to Rule 57G of the Central Excise Rules, based on the timing of credit taken in relation to the issuance of duty paying documents. The tribunal in the Larger Bench case held that credit taken after six months from the date of document issuance post-amendment was not permissible. However, the appellants in the present case had taken credit before the Rule amendment, making their situation distinct. They sought relief based on this distinction.

4. Decision and Analysis:
After hearing arguments from both sides, the tribunal noted that the goods were actually received by the appellants in December 1993, but were not entered into the required documents pending reconciliation. The tribunal found the delay justified given the circumstances explained by the appellants. Since the goods were received and utilized in manufacturing without any allegation of misuse, the tribunal concluded that Modvat credit should not have been denied. Regarding the Larger Bench decision, the tribunal agreed with the appellants' interpretation that the credit had been taken before the rule amendment, making the decision inapplicable. The tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellants.