1998 (3) TMI 223 - AT - Central Excise

Summary

Issues:
1. Eligibility for Modvat credit and penalty imposition.
2. Availing Modvat credit on undeclared inputs.
3. Denial of Modvat credit on specific materials.
4. Limitation period for demand of Modvat credit.
5. Validity of deemed Modvat credit.

The judgment delivered by the Appellate Tribunal CEGAT, Mumbai involved an appeal against an order by the Commissioner of Central Excise, Bombay-III, which held the appellants ineligible for Modvat credit amounting to Rs. 9,58,817/- and imposed penalties and confiscations. The appellants, engaged in manufacturing automobile gears, had availed Modvat credit by declaring various inputs, including forging and steel. The show cause notice alleged that the appellants availed deemed Modvat credit on goods not specified in the government orders and took Modvat credit on undeclared inputs. The Commissioner held that the appellants were ineligible for Modvat on specific materials, including 'Parker-55'. The Commissioner also referred to government orders for deemed Modvat credit and concluded that the appellants had availed credit on materials not covered by the relevant orders. The appellants argued that the demand was time-barred and that they had declared most inputs, including 'Parker-55'. They contended that the Commissioner misinterpreted their declaration and failed to provide notice regarding the deemed credit. The Departmental Representative argued that the appellants were informed of the incorrect headings for materials on which deemed credit was taken. The Tribunal found that 'Parker-55' was an anti-corrosion preparation, and discrepancies in chapter headings should not bar Modvat credit if the input was dutiable and used in manufacturing. Regarding deemed Modvat credit, the Tribunal noted discrepancies in the declaration but found that the appellants had submitted relevant documents with their returns, indicating the nature of goods received. The Tribunal held that the demand for deemed Modvat credit was not sustainable due to the appellants' compliance with procedures and lack of intent to evade duty. Consequently, the confiscation and penalties imposed were set aside, and the appeal was allowed.

---