1999 (12) TMI 270 - AT - Central Excise

Issues Involved:
1. Disallowance of Modvat credit on inputs amounting to Rs. 10,745/-.
2. Disallowance of Modvat credit on flocculating agent amounting to Rs. 1,645/-.
3. Disallowance of Modvat credit on capital goods amounting to Rs. 17,638.52.
4. Imposition of penalty of Rs. 5,000/- for alleged contravention of Modvat rules.

Issue-wise Detailed Analysis:

1. Disallowance of Modvat Credit on Inputs (Rs. 10,745/-):
The appellants took Modvat credit of Rs. 10,745/- based on invoices from registered dealers. The jurisdictional Assistant Commissioner disallowed this credit, stating that the invoices lacked essential details such as the rate of duty and amount of duty. The Commissioner (Appeals) upheld this decision, noting the absence of these details rendered the invoices invalid. However, the appellants contended that the requisite details were specified in the upper part of the invoices and could have been verified by the adjudicating authority. The Tribunal found merit in the appellants' argument, citing the decision in Pahladrai Confectioneries Pvt. Ltd. v. C.C.E., Allahabad, which held that substantial benefits of Modvat credit could not be denied due to technical irregularities. The Tribunal concluded that the Modvat credit of Rs. 10,745/- was admissible in law.

2. Disallowance of Modvat Credit on Flocculating Agent (Rs. 1,645/-):
The credit of Rs. 1,645/- on the flocculating agent was disallowed because the input was not properly declared under Rule 57G. The appellants argued that the flocculating agent was a chemical and was broadly described as "chemicals" in the declaration. The Tribunal observed that the tariff sub-headings provided (28.01 to 28.05) were for chemical elements, and the flocculating agent did not fit this description. The Tribunal upheld the decision of the lower authorities, stating that the broad description did not serve the purpose of Rule 57G, and thus, the credit on the flocculating agent was inadmissible.

3. Disallowance of Modvat Credit on Capital Goods (Rs. 17,638.52):
The appellants took credit on capital goods such as Excitation Coil, Pinion Shaft, Nickel Micro, and Hypo Rotary Gear Pump. The lower authorities disallowed this credit, stating that the descriptions and tariff sub-headings in the declaration did not match the respective goods. The appellants argued that the goods were described in the declaration under broader terms and were eligible for credit. The Tribunal examined the declaration and found that the descriptions provided were sufficiently specific and that any deficiencies were minor and curable. The Tribunal cited the decision in Eveready Industries (I) Ltd. v. C.C.E., Allahabad, which supported the eligibility of parts of generating sets for Modvat credit. The Tribunal concluded that the credit on capital goods amounting to Rs. 17,638.52 was admissible.

4. Imposition of Penalty (Rs. 5,000/-):
The Assistant Commissioner imposed a penalty of Rs. 5,000/- on the appellants for alleged contravention of Modvat rules. The appellants contended that there was no allegation of mala fide intention in the show cause notice, nor was there evidence of such intention. The Tribunal agreed with the appellants, noting the absence of any mala fide intention. Consequently, the imposition of the penalty was deemed unsustainable and was vacated.

Conclusion:
The Tribunal allowed the appeal partly. The Modvat credits of Rs. 10,745/- on inputs and Rs. 17,638.52 on capital goods were found to be in order, while the credit of Rs. 1,645/- on the flocculating agent was disallowed. The penalty of Rs. 5,000/- was vacated. The order of the Commissioner (Appeals) was modified accordingly, and the appellants were granted consequential benefits.

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