2001 (7) TMI 571 - AT - Central Excise

Summary

Issues:
Challenge to impugned order-in-appeal upholding demand of duty and penalty under Central Excise Rules due to Modvat credit availed on invoices lacking statutory declaration.

Analysis:
The appeal was filed against the impugned order-in-appeal, upholding the demand of duty and penalty imposed by the Dy. Commissioner under Rule 57-I and Rule 173Q of the Central Excise Rules. The appellants, engaged in manufacturing tubes and pipes, availed Modvat credit on inputs with invoices lacking the statutory declaration required by Notification No. 58/97 dated 30-8-1997. Show cause notices were issued for recovery of the Modvat credit amount. The Dy. Commissioner confirmed the demand and penalty, which was upheld in the appeal. The appellants contended the correctness of the invoices and Modvat credit availed. However, the Dy. Commissioner's decision was based on the absence of the statutory declaration on the invoices.

Upon review, it was found that the manufacturers of the inputs had paid the duty on the inputs but had not paid the interest, leading to the denial of Modvat credit to the appellants. The Tribunal noted that the interest component could not be considered as part of the duty. The manufacturers' failure to pay interest should not penalize the appellants entitled to the Modvat credit legally. The Tribunal emphasized that the interest could be recovered from the manufacturers, and the appellants should not be penalized for the manufacturers' omission to pay interest on delayed duty payment.

The Tribunal held that the appellants were entitled to the deemed Modvat credit as per the Rules, despite the manufacturers' failure to pay interest. The Commissioner (Appeals) erred in disallowing the credit based on the non-payment of interest by the manufacturers. The Tribunal set aside the impugned order of the Commissioner (Appeals) and accepted the appeal of the appellants, granting consequential relief as permissible by law.