2012 (4) TMI 254 - HC - Central Excise

Modvat Credit on Invoices other than duplicate copies Revenue stated that respondent-assessee illegally and irregularly availed Modvat credit on Fabricated heaters/Fabricated tubes/Crab Assembly and Refractory materials - on the ground that the words duplicate invoice was not mentioned on invoices and Refractory and Refractory materials not covered under the definition of capital goods Held that - Tribunal held that after the amendment of Rule 57G of the Rules vide Notification No.7/99-CE(NT) dated 9th February, 1999 the amended Rules would apply in all pending cases and the credit cannot be denied on minor procedural lapses in case the inputs were duty paid - credit should not be denied only on the ground that the documents referred to in sub-rule (2) does not strictly comply with the said Rule but contains the details of payment dues, description of goods, assessable value, name and address of the factory or warehouse etc. - Modvat credit on Refractory and Refractory materials is allowed as these items are used for lining of the furnace used for producing the final products - This position has also been clarified by the Central Board of Excise and Customs by issuing a circular in exercise of its power under Section 37B of the Act and made it applicable to all pending cases in favour of assessee.

Summary

Issues Involved:
1. Whether Modvat Credit can be allowed on invoices other than duplicate copies which, at the relevant time (November and December, 1995), was a mandatory requirement for availing Modvat Credit in terms of Rule 57G of the Central Excise Rules, 1944?
2. Whether the Appellate Tribunal being a creature of the statute itself can allow Modvat Credit otherwise than in accordance with Rule 57G of the Rules?

Issue-wise Detailed Analysis:

1. Whether Modvat Credit can be allowed on invoices other than duplicate copies:

The respondent-assessee, a public limited company engaged in the manufacture and sale of Aluminium and its products, availed Modvat credit under Rule 57A/57Q of the Central Excise Rule, 1944. The Revenue contended that the assessee illegally availed Modvat credit amounting to Rs.6,67,26,672.83 due to non-compliance with Rule 57G, which required the production of duplicate invoices. The Assistant Commissioner denied the credit on specific items like Fabricated heaters/Fabricated tubes/Crab Assembly due to the absence of duplicate invoices. However, the Tribunal allowed the credit, holding that the amendment to Rule 57G via Notification No.7/99-CE(NT) dated 9th February, 1999, which stated that credit cannot be denied on minor procedural lapses, applied to pending cases. The Tribunal's decision was based on the principle that procedural lapses should not hinder the benefit of Modvat credit if the inputs were duty-paid.

2. Whether the Appellate Tribunal can allow Modvat Credit otherwise than in accordance with Rule 57G:

The Tribunal's decision to allow Modvat credit despite procedural lapses was challenged by the Revenue, arguing that Rule 57G's requirements were mandatory and the amendment should apply prospectively. The Tribunal, however, interpreted the amendment as procedural, thus applicable retrospectively to pending cases. The High Court supported this view, citing that procedural rules, unlike substantive rights, can be applied retrospectively unless explicitly stated otherwise. The court referred to various judgments, including those from the Supreme Court and other High Courts, which established that procedural amendments intended to benefit litigants apply to pending cases. The court concluded that the amendment to Rule 57G was procedural, thus the Tribunal rightly extended its benefit to the respondent-assessee.

Conclusion:

The High Court dismissed the appeal, affirming the Tribunal's decision to allow Modvat credit despite the absence of duplicate invoices, as the procedural amendment to Rule 57G applied retrospectively to pending cases. The court emphasized that procedural rules should facilitate justice and not obstruct it due to minor lapses. The Tribunal's order was upheld, and the appeal was dismissed.