1996 (7) TMI 260 - AT - Central Excise

Summary

Issues:
Violation of Trade Notice No. 20/93-C.E. dated 29-10-1993 and admissibility of Modvat credit under Rule 57A.

Analysis:
The appeal was filed by the Revenue against the order of the Collector (Appeals) regarding the violation of Trade Notice No. 20/93-C.E. dated 29-10-1993. The Collector (Appeals) had held that the trade notice was for information purposes and did not have a legal binding factor. The issue was whether the non-observance of the procedure in the trade notice constituted a violation of the rules or just a procedural irregularity. The respondents were engaged in manufacturing steel ingots and availing input credit under the Modvat scheme. The Department alleged that the respondents melted defective steel ingots without notifying the Superintendent, Central Excise, as required by the trade notice. The Asstt. Collector ordered the reversal of Modvat credit taken and imposed a penalty. The Revenue argued that the trade notice was part of the rule, and non-compliance justified the reversal of credit and penalty.

The Tribunal found that the respondents had indeed melted defective steel ingots without notifying the Superintendent, Central Excise, as per the trade notice. However, the Tribunal held that the substantive right to claim Modvat credit could not be denied for a procedural lapse. Rule 57A allowed credit of duty paid on inputs, and Rule 57G outlined the procedure for taking credit under the Modvat scheme. The respondents had used defective steel ingots in the manufacture of final products, entitling them to Modvat credit. The Tribunal agreed with the Collector (Appeals) that the failure to notify the Superintendent was a procedural requirement, not a breach of rules. As the inputs were used in the final product, the Tribunal upheld the Collector (Appeals) decision, stating that substantive rights cannot be denied for procedural irregularities.

In conclusion, the Tribunal upheld the order of the Collector (Appeals), rejecting the appeal by the Revenue. The judgment clarified that while the trade notice outlined procedural requirements, the failure to comply did not negate the substantive right to claim Modvat credit for inputs used in the manufacture of final products.