1998 (2) TMI 326 - AT - Central Excise

Summary

Issues:
1. Allegations of wrongly availing Modvat credit.
2. Dispute regarding receipt of imported goods and utilization for manufacturing.
3. Imposition of penalty for procedural violation of Rule 57F(2).

Analysis:
1. The appellants were engaged in manufacturing "Empty Tin Containers" and were availing Modvat credit for inputs such as tin plates, aluminium foils, paints, and varnishes. Allegations were made through show cause notices for wrongly availing Modvat credit amounting to Rs. 8,29,749 and Rs. 7,83,629 on different dates. The issue revolved around the discrepancy in the receipt of goods as per Bills of Entry and utilization for claiming credit.

2. The appellants contended that they had purchased Electrolytic Tin plate on High Sea Basis, cleared after payment of Customs duty, and entrusted to a third party for shearing process. They argued that the goods were physically received in stages due to the time-consuming shearing process, and all details were recorded in statutory accounts. The authorities alleged improper utilization and imposed penalties, despite the appellants' explanation and supporting documents showing the continuity of the imported goods.

3. The learned Advocate cited a Tribunal judgment emphasizing that Modvat credit cannot be denied if there is a clear correlation between duty paid inputs and the final product. The appellants argued that the imported goods were received after shearing, and the procedural violation should not negate the Modvat benefit. The authorities opposed a remand, claiming no correlation and justifying the penalty for early credit availing.

4. Upon careful consideration, the Tribunal acknowledged the need for a reevaluation by the original authority. The Tribunal noted that while there was a procedural violation, the appellants should be given a chance to establish the correlation between imported goods and the final product, as per the precedent set by the Roshan Tin Printers case. The matter was remanded for further review, allowing the appellants an opportunity to present their case in line with established legal principles. The appeals were allowed by remand, emphasizing the importance of reevaluation based on the applicable legal standards.