1996 (8) TMI 239 - AT - Central Excise

Summary

Issues:
1. Violation of Rule 57G of Central Excise Rules regarding Modvat credit scheme.
2. Interpretation of Rule 57H of Central Excise Rules.
3. Eligibility for Modvat credit based on specific circumstances and mitigating factors.

Analysis:

In this case, the appeal was made against the order passed by the Commissioner of Central Excise (Appeals), New Delhi, regarding the violation of Rule 57G of Central Excise Rules by the appellants who manufacture stainless steel and other alloy steel. The issue arose when the department detected that the appellants had taken credit for inputs received prior to filing the declaration under Rule 57G, leading to the initiation of proceedings for recovery of duty. The Additional Commissioner confirmed the demand for duty, which was upheld by the Commissioner (Appeals).

Upon hearing both parties, the Tribunal examined Rule 57H of Central Excise Rules, which has two limbs. The first limb concerns inputs lying in stock or received after filing the declaration for Modvat credit, while the second limb pertains to inputs used in manufacturing final products cleared after a specified date. The Tribunal noted that the appellants failed to inform the Assistant Commissioner about inputs received before the declaration but had taken credit before filing. However, mitigating circumstances were considered, including the fact that the inputs were not used for manufacturing until after the declaration was acknowledged. The Tribunal referenced a Trade Notice and the proximity of input receipt to the declaration date to support the appellants' claim.

The Tribunal emphasized that the Modvat credit scheme is beneficial legislation and, based on the specific circumstances of the case and absence of mala fides, held that the appellants were eligible for Modvat credit of Rs. 45,226.50. The decision allowed the appeal, overturning the previous orders and granting the appellants the benefit of the credit.