1998 (1) TMI 306 - AT - Central Excise

Summary

Issues:
Appeal against Modvat credit entitlement for maize starch under incorrect chapter heading without proper declaration under Rule 57G.

Analysis:
The appeal was filed against a decision allowing Modvat credit for maize starch without the necessary declaration under Rule 57G. The respondents, engaged in dry battery cell manufacturing, availed Modvat credit without declaring maize starch under the correct chapter heading. The Department argued that the respondents failed to file the required declaration for maize starch under sub-heading 1103, thus not entitled to Modvat credit. The Collector relied on a Ministry of Finance letter stating omission of chapter numbers on gate passes doesn't affect Modvat credit utilization. The Department contended the letter doesn't address declaration filing under Rule 57G.

The Department claimed the respondents' failure to declare maize starch under the correct sub-heading disqualifies them from Modvat credit. The respondents' declaration only mentioned battery grade starch, not maize starch. The Department argued the Finance Ministry letter doesn't cover declaration filing requirements under Rule 57G. Conversely, the respondents' counsel supported the Collector's decision, citing the starch's use in battery manufacturing and emphasizing the importance of substance over nomenclature for Modvat credit eligibility.

Upon review, it was found that the respondents declared battery grade starch, not maize starch, under the incorrect chapter heading. The suppliers were licensed to manufacture various starch types under different chapters, indicating the need for accurate declarations under Rule 57G. Rule 57G mandates manufacturers to declare inputs for Modvat credit eligibility. The Collector's decision to prioritize substance over formalities was deemed incorrect, as proper declaration filing is mandatory for Modvat benefits. The term "shall file" in Rule 57G signifies a mandatory requirement, not discretionary. Therefore, the Collector's order was reversed, and the Department's appeal was allowed, emphasizing the importance of adhering to Rule 57G for Modvat credit entitlement.