1992 (10) TMI 193 - AT - Central Excise

Summary

Issues:
1. Denial of MODVAT credit due to non-compliance with Notification 214/86 and Notification 351/86.
2. Dispute over the status of the job worker under Notification 214/86.
3. Procedural formalities and compliance under the MODVAT scheme.
4. Requirement of verification and records maintenance for MODVAT credit eligibility.
5. Interpretation of MODVAT scheme as a beneficial legislation to mitigate duty cascading effect.
6. Remand for de novo consideration by the original authority.

Analysis:

1. The appeal challenged the denial of MODVAT credit amounting to Rs. 4,49,599.54 by the Collector of Central Excise (Appeals), Madras, citing non-compliance with Notification 214/86 and Notification 351/86. The appellant contended that they operated under the MODVAT scheme, sending aluminium ingots to a job worker temporarily. Despite the job worker paying duty on the rolled product, the appellant argued they should not be disqualified from MODVAT credit solely based on procedural lapses.

2. The dispute arose regarding the job worker's status under Notification 214/86, which requires goods to be manufactured by the job worker and returned without duty payment to the raw material supplier. The appellant's failure to adhere to the provisions of Notification 214/86 was highlighted by the Departmental Representative, emphasizing the absence of specific permission under Rule 57F(2) for the appellant.

3. The Tribunal acknowledged the appellant's bona fide intentions in sending the ingots to the job worker and complying with intimation requirements. Emphasizing the necessity of adherence to procedural formalities under the MODVAT scheme, the Tribunal underscored the importance of ensuring the proper utilization of inputs for intermediate goods manufacture without diversion or non-compliance with waste disposal regulations.

4. Stressing the need for verification through contemporaneous records between the appellant and the job worker, the Tribunal highlighted the significance of confirming whether the ingots were used for manufacturing rods and if the rods were returned to the appellant's factory. The Tribunal suggested that compliance with Rule 57A and other regulatory requirements should be the focus rather than mere procedural errors.

5. Viewing the MODVAT scheme as a beneficial legislation aimed at reducing duty cascading effects, the Tribunal opined that procedural infractions should not automatically disqualify an assessee from MODVAT benefits if the intended use of inputs is demonstrated, and other regulatory obligations are met. The Tribunal emphasized a balanced approach in assessing compliance under the MODVAT scheme.

6. Consequently, the Tribunal remanded the matter for fresh consideration by the original authority, directing a review based on the observations made. The Tribunal clarified that the job worker's lack of MODVAT credit utilization and the appellant's non-claim of credit for received goods should be considered during the reassessment process to determine the eligibility for MODVAT credit in accordance with the scheme's objectives.