2003 (9) TMI 178 - AT - Central Excise

Summary

Issues:
- Duty demand and penalty confirmed for denial of Modvat credit on inputs used in manufacturing wrist watches.
- Maintenance of manual register form for input records versus computerized maintenance.
- Justification of maintaining accounts on computer.
- Failure to act on the request for computerization of RG 23A Part I.

Analysis:
1. The appellant, a wrist watch manufacturer, faced a duty demand of over Rs. 1.7 crore and a penalty of Rs. 1 lakh due to the denial of Modvat credit on inputs used in manufacturing. The denial was based on the appellant's failure to maintain manual register forms as required by the authorities.

2. The appellant argued that maintaining accounts on a computer was necessary due to dealing with a large variety of watches involving thousands of parts, which could only be efficiently handled through electronic data storage. They had sought permission for computerized accounts, recommended by the jurisdictional Assistant Commissioner to the Commissioner, Central Excise, Meerut, as evidenced by a letter dated 28-3-1995.

3. The Tribunal noted that there was no dispute regarding the credit taken by the appellant, which was entirely valid. The only issue was the form of record-keeping, with input records being maintained on a computer instead of a manual register. The Assistant Commissioner's letter highlighted the appellant's difficulty in manual record-keeping due to the volume of parts involved in watch production.

4. The failure to act on the request for computerization of RG 23A Part I, as evidenced by the letter dated 28-3-1995, was identified as the root cause of the dispute. The Tribunal concluded that the appellant was being penalized for administrative inaction, with no substantial dispute over the eligibility or amount of credit taken. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.