2000 (2) TMI 431 - AT - Central Excise

Summary

Issues Involved: Denial of Modvat credit on input caprolactum based on dealer's invoice, imposition of penalty on the appellants for the dealer's actions.

Denial of Modvat Credit on Input Caprolactum: The appellants, engaged in manufacturing Nylon Filament Yarn, availed Modvat facility under Rule 57A of the Central Excise Rules. They took credit in July 1995 on input caprolactum. The denial of credit was due to invoices issued by a registered dealer based on the original copy of the manufacturer's invoice, violating Rule 173-Q. The Adjudicating Authority denied credit and imposed a penalty on the dealer but not on the appellants. However, the Commissioner (Appeals) upheld the denial of credit and imposed a penalty of Rs. 20,000 on the appellants as well.

Appellants' Argument: The appellants contended that they took credit based on the dealer's invoice, received under the cover of the proper copy of the invoice when the goods were received by the dealer from the manufacturer. They argued that they were not obligated to verify the dealer's actions, especially when the invoice issued by the dealer appeared proper. They cited a previous Tribunal ruling to support their position that credit should not be denied when the assessee did not contravene any provision and had no means to verify the dealer's actions.

Department's Position: The department highlighted the need for finalizing RT-12 assessment by verifying invoices, particularly Modvat invoices. It was observed that the dealer issued invoices based on the manufacturer's original invoice, which was deemed inadmissible.

Judgment: After careful consideration, the Tribunal found that the appellants had taken credit based on the dealer's invoice. The Tribunal emphasized that any mistake made by the dealer in issuing the invoice should result in action against the dealer, not the appellants. Since the appellants did not contravene any provision and had no means to verify the dealer's actions, denying Modvat credit or imposing a penalty on the appellants was deemed unjustified. Citing a relevant case precedent, the Tribunal allowed the appeal, concluding that the appellants should not be penalized for the actions of another party.