1998 (7) TMI 180 - AT - Central Excise

Summary

Issues Involved:
Denial of Modvat credit and imposition of penalty based on the validity of invoices issued by specific companies.

Analysis:
1. Validity of Invoices and Denial of Modvat Credit:
The case involved the denial of Modvat credit and imposition of a penalty on the appellants due to alleged improper invoices issued by M/s. SAIL and M/s. TISCO. The Commissioner of Central Excise, Shillong denied the credit as the invoices were not considered proper and legal under Rule 57GG. The main contention was that the invoices were not colored and pre-printed with serial numbers as required. The appellant argued that during the relevant period, a notification was issued prescribing different colors for modvatable invoices, and the companies had requested temporary use of differently colored invoices due to stationery unavailability. The consultant emphasized that the technical lapses in the invoices should not be the basis for denying Modvat credit, especially when the receipt and utilization of inputs were not in dispute.

2. Revenue's Position and Violation of Procedure:
The Revenue, represented by the JDR, contended that there was a violation of the procedure prescribed by the notifications issued in 1994 and 1995 regarding the format of invoices for Modvat credit. It was argued that the dealers had sufficient time to comply with the prescribed procedure, and any deviation rendered the invoices invalid for claiming the credit under Rule 57GG.

3. Judgment and Conclusion:
After considering arguments from both sides, the Tribunal found the issue to be narrow. The denial of Modvat credit was primarily based on the non-conformity of the invoices with the color scheme introduced by a 1995 notification. The Tribunal observed that during the relevant period, the color scheme was newly introduced, and the minor lapses in the invoices, such as handwritten serial numbers, should not be grounds for denial of substantive Modvat credit benefits. The Tribunal noted that the Revenue did not dispute the entitlement of the appellants to the credit or the legitimate use of inputs in manufacturing final products. Consequently, the denial on hyper-technical grounds was deemed improper, and with mutual consent, the appeal was allowed, setting aside the impugned order.

4. Additional Clarification by Vice President:
The Vice President clarified that the Stay Petition was first heard and allowed, followed by the main Appeal being considered due to the narrow compass of the issue and the comprehensive submissions made during the proceedings. With no objections from either party, the main Appeal was allowed based on the reasons outlined in the judgment, ultimately disposing of the case.