1998 (5) TMI 105 - AT - Central Excise

Summary

Issues:
Challenge to disallowance of Modvat credit without Rule 57H declaration, imposition of duty, and penalty.

Analysis:
The appellant challenged the Order-in-Appeal confirming the disallowance of Modvat credit under Rule 57H of the Central Excise Rules, 1944, by the Commissioner of Central Excise (Appeals), Bangalore. The dispute arose when the appellant, engaged in manufacturing Pharmaceutical Sutures, failed to submit a declaration under Rule 57H, despite intending to avail Modvat credit on inputs like gut, chemicals, and needles. The Additional Commissioner disallowed the credit, demanded duty equal to the amount availed, and imposed a penalty of Rs. 5,000 under Rule 173Q(1). The Collector (Appeals) upheld this decision.

The appellant's Counsel argued that the case fell under sub-rules (1B) and (4) of Rule 57H, allowing credit for duty paid on inputs. However, the appellant failed to file the necessary declaration under Rule 57H(1B) to inform the Assistant Collector about the stock of raw materials or their use in manufacturing finished products. The Tribunal had previously granted relief in cases of substantial compliance with declaration requirements, but in this instance, the failure to file the declaration hindered the Assistant Collector's verification process, impacting revenue.

The Counsel contended that two letters sent to the Assistant Collector served as the declaration under Rule 57H. However, the Tribunal found that these letters did not fulfill the declaration requirements as they did not provide details of the raw materials stock or express readiness for verification. The Tribunal differentiated this case from precedents where minor procedural infractions did not lead to credit rejection. Consequently, the denial of Modvat credit was deemed justified due to the failure to file the necessary declaration.

Despite upholding the denial of Modvat credit, the Tribunal set aside the penalty imposition, allowing the appeal only in this regard. This decision highlights the significance of complying with procedural requirements, particularly in matters affecting revenue collection and credit entitlement under the Central Excise Rules.

This judgment underscores the importance of strict adherence to procedural rules in availing benefits like Modvat credit and the consequences of non-compliance, even in cases where minor procedural infractions may not be condoned.