1995 (7) TMI 176 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for Modvat credit on inputs used in the intermediate product.
2. Compliance with Chapter X procedure.
3. Relevance of procedural compliance versus substantive compliance.
4. Consideration of new legal pleas at the appellate stage.
5. Remand for de novo adjudication.

Issue-Wise Detailed Analysis:

1. Eligibility for Modvat Credit on Inputs Used in the Intermediate Product:
The appellant argued that they were eligible for Modvat credit on inputs used in the intermediate product, dipped tyre cord fabrics, which were transferred from their Madras factory to their Calcutta factory under Notification No. 217/86 without following the Chapter X procedure. They cited decisions from the West Regional Bench (Bajaj Tempo Ltd. v. Collector of Central Excise, Pune) and the North Regional Bench (M/s. Lupin Laboratories Ltd. v. Collector of Central Excise, Indore) to support their claim that Notification 217/86 allows for such credit to avert payment of duty at each intermediate stage.

2. Compliance with Chapter X Procedure:
The respondent contended that the appellant was not eligible for the benefit of Notification 217/86 due to non-compliance with the Chapter X procedure. The Tribunal acknowledged that observance of Chapter X procedure is a condition stipulated in Notification 217/86. However, the appellant argued that substantial compliance with the law should suffice, citing precedents that procedural lapses should not defeat substantive relief.

3. Relevance of Procedural Compliance versus Substantive Compliance:
The Tribunal considered the principle that substantial compliance with legal provisions should not be denied for procedural lapses. The North Regional Bench's view, supported by various rulings, emphasized that non-observance of technical requirements should not negate the substantive benefits of the Modvat Scheme, provided the inputs were used for the declared finished product.

4. Consideration of New Legal Pleas at the Appellate Stage:
One member of the Tribunal (Member (T)) argued against considering new legal pleas at the appellate stage, especially when the appellant had not raised these arguments before the lower authority and had admitted their mistake in availing Modvat credit. The member highlighted that the appellant did not provide bona fide reasons for not claiming the benefit earlier and had voluntarily reversed the Modvat credit.

5. Remand for De Novo Adjudication:
The Vice President (Member (J)) suggested remanding the matter for reconsideration in light of the various pleas and case laws cited by the appellant. However, Member (T) opposed this, arguing that it would require fresh investigation into compliance with Chapter X from 1986 onwards, which was not substantiated by the appellant. The majority decision, influenced by Member (T) and supported by another member, concluded that no indulgence should be shown for urging a fresh plea requiring factual investigation.

Final Judgment:
The appeal was dismissed based on the majority decision, upholding the lower authority's order and denying the appellant's claim for Modvat credit under Notification 217/86 due to non-compliance with Chapter X procedure and the absence of substantive reasons for reconsideration.