1997 (1) TMI 204 - AT - Central Excise

Summary

Issues:
1. Whether the demand for reversing credit of Rs. 7,82,349.71 P. taken on paper bags falling under Chapter 39 of the CETA 1985 is justified.
2. Whether the Modvat credit can be denied due to discrepancies in the description of inputs declared.

Issue 1:
The Appellate Tribunal considered the contention that no show cause notice proposing the recovery of the amount was issued, and no personal hearing was granted before confirming the demand. The Tribunal noted that the jurisdictional Superintendent of Central Excise had issued communications to the appellants clearly stating the discrepancy in the declaration of paper bags. These communications served as legal notice, putting the appellants on notice of the grounds for reversing the credit. The Tribunal held that the absence of a personal hearing before the Assistant Collector did not affect the proceedings as the appellants were heard by the lower Appellate authority. The Tribunal distinguished case law cited by the appellants, emphasizing that the appellants were adequately informed of the charges they needed to address. Consequently, Issue 1 was answered in the negative, upholding the department's decision to reverse the credit.

Issue 2:
Regarding the description of inputs in the gate passes as 'paper reinforced bags' classified under heading 3923.90, the Tribunal found a significant disparity between the goods declared and the inputs utilized. While Chapter 39 covers plastic articles and Chapter 48 covers paper articles, the appellants had declared Chapter 48 for paper bags, not the actual inputs received. The Tribunal rejected the appellants' claim that they received paper bags reinforced with plastic, as it was unsubstantiated. The Tribunal upheld the lower authorities' findings that the inputs used were distinct from those declared, emphasizing that Modvat credit cannot be granted on undeclared inputs. Despite both Chapter headings being covered by the Modvat Scheme and the inputs being duty paid, the Tribunal ruled against the appellants on this point. Consequently, the impugned order was upheld, and the appeal was rejected.

In conclusion, the Appellate Tribunal upheld the decision to reverse the credit taken on paper bags falling under Chapter 39, as the appellants had not declared the actual inputs received. The Tribunal emphasized the importance of accurate declaration of inputs for claiming Modvat credit and rejected the appellants' arguments regarding the lack of show cause notice and the broad description of inputs.