1999 (5) TMI 223 - AT - Central Excise

Summary

Issues:
1. Admissibility of Modvat credit for goods consigned to a third party before reaching the appellant's premises.
2. Compliance with procedural requirements under Rule 57F(2) and 57F(3) for availing Modvat credit.
3. Imposition and reduction of penalty for procedural lapses.

Issue 1 - Admissibility of Modvat credit:
The case involved the appellant, a manufacturer of P. & P. Medicines, availing Modvat credit under Rule 57A for goods consigned to M/s. Mittu Pharma Ltd. A/c of Lupin Laboratories Ltd. The Department contended that since the goods did not directly reach the appellant's premises, Modvat credit was inadmissible. The appellant argued that the goods were printed by M/s. Mittu Pharma as per their order, and the printed capsules were received and used in their factory. The Asstt. Commissioner denied Modvat credit, but the ld. Commissioner (Appeals) upheld the denial. The Tribunal, after considering the submissions and case law, held that Modvat credit was admissible to the appellants as the substantive benefit could not be denied for procedural lapses.

Issue 2 - Compliance with procedural requirements:
The dispute centered around the procedural requirements under Rule 57F(2) and 57F(3) for availing Modvat credit. The Department argued that the goods were not directly received in the appellant's factory as per the invoices, and the prescribed procedure was not followed. The appellant contended that there was no dispute regarding the receipt and utilization of duty-paid inputs in their premises, and procedural irregularities should not lead to the denial of substantial benefits. The Tribunal, citing previous decisions, held that while procedural compliance was necessary, substantive benefits like Modvat credit could not be denied solely on procedural grounds.

Issue 3 - Imposition and reduction of penalty:
The Asstt. Commissioner imposed a penalty of Rs. 10,000 for non-compliance with procedural requirements, which was later reduced to Rs. 5,000 by the ld. Commissioner (Appeals). The Tribunal found the imposition of the penalty for procedural lapses to be legally sustainable. Despite upholding the penalty, the Tribunal saw no reason to interfere with the reduced amount of Rs. 5,000. Therefore, the Tribunal modified the decision regarding Modvat credit but upheld the penalty imposed for the procedural lapses.

In conclusion, the Tribunal allowed the appeal regarding the admissibility of Modvat credit, emphasizing substantive benefits over procedural lapses, while maintaining the imposition of a reduced penalty for non-compliance with procedural requirements.