1997 (8) TMI 220 - AT - Central Excise

Summary

Issues:
- Denial of Modvat credit and penalty confirmation for not filing the required declaration under Rule 57G of Central Excise Rules for utilizing inputs in manufacturing Motor Vehicles falling under Chapter Heading 8703.

Analysis:
1. The appeal stemmed from the denial of Modvat credit amounting to Rs. 19,000 and confirmation of a penalty of Rs. 2,500 due to the appellants' alleged failure to file the necessary declaration for utilizing inputs in manufacturing Motor Vehicles under Chapter Heading 8703. The appellants argued that they had filed a classification list under Rule 173B, declared in the registration certification, and included the Tariff heading in all final invoices. They contended that the same inputs were used for manufacturing Public Passenger Motor Vehicles falling under Chapter Heading 8702 or 8703, albeit inadvertently omitting Chapter Heading 8703 in an initial declaration but rectifying it later. The lower authorities rejected their plea, citing the absence of a proper declaration as grounds for denying Modvat credit and imposing a penalty.

2. The appellants' advocate argued that the inputs and components declared for the final product were consistent across manufacturing under Chapter Heading 8702 or 8703, emphasizing the inadvertent omission of Chapter Headings 8702 and 8703. They highlighted past cases where similar procedural lapses were condoned by the Tribunal and contended that the inadvertent error should not warrant denial of Modvat credit or imposition of a penalty. The advocate referenced cases like Khosla Cast Steel & Alloys Pvt. Ltd. and others to support the argument that such lapses had been previously overlooked.

3. The Departmental Representative contended that the failure to file the declaration was not a mere procedural lapse but a substantial one, asserting that the appellants had taken Modvat credit without the requisite declaration, constituting a deliberate act justifying the imposition of a penalty. The DR reiterated the findings of the lower authorities in this regard.

4. Upon careful consideration, the judge found merit in the appellants' submission. Noting that the inputs were used consistently for manufacturing Public Passenger Motor Vehicles without cross-utilization or misuse, the judge observed that the appellants rectified the declaration by including Heading 8703 later. Citing precedents like Indag Rubber Limited, the judge emphasized that the broad description of inputs in the declaration, coupled with the absence of dispute regarding the utilization of goods in manufacturing the final product, supported the appellants' case for Modvat credit. Drawing parallels with similar cases like Khosla Cast Steel & Alloys Pvt. Ltd. and Kelvinator of India Ltd., the judge concluded that the appellants' plea should be accepted, leading to the setting aside of the impugned order and allowing the appeal without imposing a penalty.