1989 (9) TMI 246 - AT - Central Excise

Summary

Issues involved:
The appeal against the order of the Collector of Central Excise (Appeals), Madras dated 15-12-87 regarding availing MODVAT credit without obtaining necessary permission under Rule 57F(2) of the Central Excise Rules.

Details of the Judgment:

Issue 1: Failure to obtain necessary permission under Rule 57F(2)
The appellant failed to obtain permission under Rule 57F(2) before sending inputs for processing, leading to the reversal of MODVAT credit. The appellant claimed ignorance of the MODVAT procedure as the reason for the lapse. The Tribunal acknowledged that the inputs qualified for MODVAT credit and emphasized that the purpose of the MODVAT Scheme is to reduce the burden on assessees by allowing credit on inputs used in declared finished products. The Tribunal noted that the authorities later granted permission for similar inputs, indicating the appellant's plea of ignorance could be genuine. The Tribunal highlighted that the MODVAT Scheme is a beneficial legislation subject to procedural requirements under Rule 57F.

Issue 2: Compliance with procedural requirements and substantial relief under MODVAT Scheme
The Tribunal emphasized the importance of complying with procedural requirements under the MODVAT Scheme, specifically Rule 57F(2) for removal of inputs for processing. It noted that while the appellant did not initially apply for permission, they later fulfilled all other requirements of the Central Excise Rules under the MODVAT Scheme. The Tribunal highlighted that the purpose of the Rules is to provide substantive relief by allowing credit on inputs to reduce financial burden, and non-compliance with procedural lapses should not automatically deny this relief. It stressed that substantial compliance with the provisions is crucial for availing MODVAT credit, and procedural lapses should be examined in light of the legislative purpose of the concession.

Conclusion:
The Tribunal remanded the matter to the lower authorities for re-examination and decision based on whether the inputs sent out without permission were ultimately used in the finished product. It emphasized that the benefit of concession should be granted if the records verify the proper utilization of inputs, despite the procedural lapse. The Tribunal highlighted that penalizing actions can be taken for violations of the Rules but underscored the importance of examining each lapse in relation to the legislative purpose of the concession.