1999 (12) TMI 446 - AT - Central Excise

Summary

Issues: Alleged wrongful Modvat credit, confiscation of unrecorded final products, imposition of penalty, restoration of Modvat credit, confiscation of goods

Alleged wrongful Modvat credit:
The appeal involved the manufacturing of "Polypropylene Tower Packing" where stainless steel sheets were sent to job workers in Mumbai under Rule 57F(2). The Central Excise officers found final products not entered in the RG 1 Register, leading to a Show Cause Notice alleging the wrongful Modvat credit and confiscation of unrecorded final products. The Addl. Collector ordered reversal of the credit, imposed a penalty, and confiscated goods. The appellants argued that the simultaneous credit was not wrongly taken as the law allowed such movement under Rule 57F(2).

Confiscation of unrecorded final products:
The allegation was that final goods were not received in the factory but cleared directly to buyers. Statements from the factory personnel conflicted on whether goods were brought back to the factory for further processing. The Addl. Collector observed a lack of evidence supporting the physical transportation of final goods to Baroda, leading to the requirement of Modvat credit reversal. However, the duty was paid on the goods, and the absence of evidence did not conclusively prove the non-receipt of goods, thus questioning the necessity of reversing Modvat credit.

Imposition of penalty:
The penalty was imposed due to the procedural violations and the bending of rules for convenience by the assessees. The judgment considered the closedown of the unit and the restoration of the reversed credit, but upheld the penalty to deter violations of procedural rules despite the possibility that the restored Modvat credit might not be utilized.

Restoration of Modvat credit:
The tribunal restored the Modvat credit amounting to Rs. 2,62,838/-, as it was not convinced that the final goods not physically entering the principal manufacturer's factory warranted the denial of the Modvat benefit. The technical violation of goods not entering the factory did not outweigh the substantive benefit of Modvat, leading to the restoration of the credit.

Confiscation of goods:
The polypropylene tower packing was confiscated as it was not recorded in the books of accounts. The Addl. Collector's decision on the quantum of fine was considered lenient, and no interference was warranted in this aspect. Apart from the restoration of Modvat credit, the appeal was dismissed, upholding the confiscation of goods and the quantum of penalty imposed.