1999 (7) TMI 202 - AT - Central Excise

Summary

Issues:
Disallowed Modvat credit based on original invoice copy instead of duplicate copy. Interpretation of Rule 57G (2A) regarding Modvat credit availed on lost duplicate copy. Applicability of Rule 57G (2A) in case of lost duplicate copy in factory. Prevalent practice of annexing photocopies of duplicate invoices with RT 12 returns. Department's concern about misutilization of lost duplicate invoices. Tribunal decisions regarding disallowance of Modvat credit based on original invoices. Board's Circular on verification of documents for Modvat credit involving duty over Rs. 10,000. Procedural infirmities in availing Modvat credit due to lost duplicate copies.

Analysis:

The primary issue in this case revolves around the disallowance of Modvat credit amounting to Rs. 42,476 on the grounds that it was claimed based on the original copy of the invoice instead of the required duplicate copy as per Rule 57G read with Rule 52A. The appellant, represented by a consultant, argued that the credit was initially taken based on duplicate invoice copies, which were later lost in the factory due to human error. The appellant highlighted the substantial amount of Modvat credit availed annually, emphasizing the absence of any intention to misuse the invoices.

The department countered the appellant's arguments, asserting that Modvat credit can only be availed on the original copy of invoices when the duplicate copy is lost in transit, which does not include loss within the appellant's factory premises. The concern raised was the potential misutilization of lost duplicate invoices nationwide, making detection challenging for the department. The department relied on various Tribunal decisions, such as Havell's Electric and Nestle, to support the disallowance of Modvat credit based on original invoices.

In response, the consultant reiterated that the lost duplicate copies were not at risk of misutilization by other manufacturers, citing a Board's Circular requiring verification of documents involving duty exceeding Rs. 10,000 for Modvat credit purposes. The consultant emphasized that the credit was initially taken based on duplicate copies, and the loss occurred after the credit was claimed, preventing the production of originals for defacement before Central Excise authorities.

The judgment acknowledged the factual loss of invoices in the appellant's factory, without dispute from the department, regarding the receipt, duty payment, utilization, and clearance of inputs. The judgment highlighted Tribunal precedents suggesting that minor procedural errors should not lead to the disallowance of Modvat credit when the inputs' journey and utilization are clear. Consequently, the impugned orders disallowing the credit were deemed unsustainable, leading to their setting aside and allowing the appeal with consequential relief to the appellants.