1997 (1) TMI 257 - AT - Central Excise

Summary

Issues:
- Disallowance of credit under the modvat scheme
- Allegation of taking credit based on inadmissible documents
- Interpretation of Notification No. 15/94-C.E. (N.T.)
- Compliance with procedural requirements for claiming Modvat credit

Analysis:

The case involved a dispute regarding the disallowance of Modvat credit by the department, alleging that the appellants had taken credit based on inadmissible documents. The appellants, engaged in the manufacture of sugar confectionery, argued that the invoices in question were in conformity with Notification No. 15/94-C.E. (N.T.) and referred to specific invoices to support their claim. They contended that the inputs covered by the disputed invoices were properly accounted for and utilized in further production, establishing the duty paid character. The appellants relied on previous tribunal decisions to support their argument that procedural lapses should not be a basis for denying Modvat credit if the essential requirements of receipt, duty payment, and utilization for production were met.

Upon examination of the invoices and the relevant regulations, the judge noted that the invoices were issued shortly after the introduction of a new system for payment of duty. The government had issued clarifications through Trade Notices to explain the procedures for claiming credit under the new system. The judge found that the invoices clearly showed the particulars of duty paid and were issued by wholesale dealers as defined by the Central Excise and Salt Act, 1944. There was no dispute about the receipt of goods, duty paid character, or utilization of inputs by the appellants. Considering the technical nature of the irregularities and the transitional stage during which they occurred, the judge held that the irregularities should not be a basis for denying Modvat credit to the appellants.

In conclusion, the judge set aside the impugned order disallowing the Modvat credit and allowed the appeal in favor of the appellants. The decision was based on the finding that the appellants had met the essential requirements for claiming the credit under the modvat scheme, despite technical irregularities in the documentation process.