1998 (11) TMI 167 - AT - Central Excise

Summary

Issues:
1. Admissibility of Modvat credit on gunny bags purchased from non-registered dealers.
2. Interpretation of Rule 57H regarding credit facilities on goods received and stored in the factory.
3. Relevance of procedural compliance in extending substantive benefits.

Analysis:
1. The case involved the admissibility of Modvat credit on gunny bags purchased from non-registered dealers. The Assistant Commissioner initially denied transitional credit, citing Rule 57GG of Central Excise Rules, which required invoices to be issued by registered dealers for credit eligibility. The Commissioner, however, allowed the appeal based on precedents like Tripty Drinks (P) Ltd. v. CCE and Bengal Safety Industries v. C.C.E., emphasizing that substantive benefits should not be denied due to procedural lapses.

2. The appeal memorandum contested the Commissioner's decision, arguing that on the material date, the law mandated credit based only on invoices from registered dealers. The appeal cited judgments like C.C.E. v. Jain Bhavani Steel Enterprises (P) Ltd. and other cases to support the contention that benefit extension was incorrect. However, the Tribunal upheld the Commissioner's decision, stating that Rule 57H aimed to provide credit on goods already received, and expecting traders to be registered in anticipation of future changes would be impractical.

3. The Tribunal considered the submissions and highlighted that the interpretation of Rule 57H should not render the provision ineffective. It emphasized that the case involved an unreasonable burden on the dealer, making it impossible to comply with the registration requirement beforehand. The Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision to extend the benefit and rejecting the plea to remit the proceedings for further action.

In conclusion, the Tribunal upheld the Commissioner's decision to allow Modvat credit on gunny bags purchased from non-registered dealers, emphasizing the practicality and reasonableness of the interpretation of Rule 57H in extending benefits to the assessees.