2013 (9) TMI 932 - HC - Central Excise

MODVAT Credit - Whether MODVAT Credit can be availed by the assessee on the basis of certificate issued by superintendent preventive Held that - The Tribunal had not committed any error in allowing the credit, as it has recorded the findings that the glass shells were not going to any customer but were to be shifted to a location outside the factory - Non-generation of invoice was the only deficiency in the whole transaction, but this does not erase the duty-paid character of the glass shells, which were received from outside the factory - The re-entry of these glass shells in the factory for use in the manufacture of final product has to be held as entry of duty-paid inputs and the credit cannot be disallowed. Levy of penalty - Whether the finding of facts for clandestine removal of goods recorded by adjudicating authority and the same has been upheld upto CEGAT can be overlooked in subsequent proceedings Held that - In the order awarding penalty, there is no such finding that the goods were brought from outside the factory, without payment of duty - It was only because of reversal of entry on duty-paid goods, the penalty was imposed. An affidavit has been filed enclosing certificate of Superintendent (Preventive), verifying that the glass shells were stored outside the factory due to shortage of space in the factory premises - The penalty order could not be a ground, for not allowing Modvat Credit on the finished goods - The grounds raised in the appeal do not raise any substantial questions of law to be considered in the appeal.

Summary

Issues:
1. Whether MODVAT Credit can be availed based on a certificate issued by the superintendent preventive?
2. Whether findings of clandestine removal of goods can be overlooked in subsequent proceedings?

Analysis:

Issue 1: MODVAT Credit based on certificate by superintendent preventive
The case involved a dispute over the availing of MODVAT Credit by the assessee based on a certificate issued by the Superintendent (Prev.) of Central Excise. The Central Excise Department had found a shortage of glass shelves during an inspection, leading to the reversal of MODVAT Credit and imposition of a penalty. The Tribunal upheld the assessee's appeal, allowing the credit. The Court affirmed the Tribunal's decision, emphasizing that the duty-paid character of the goods was maintained despite deficiencies in documentation. The absence of invoices did not negate the duty-paid status of the goods, which were intended for internal use outside the factory premises. The Court rejected the department's argument that goods removed for reasons like space constraints or polishing would lose MODVAT credit eligibility upon re-entry.

Issue 2: Overlooking findings of clandestine removal
Regarding the findings of clandestine removal of goods, the Court noted that the penalty imposed was due to the reversal of duty-paid goods, not for bringing goods into the factory without duty payment. An affidavit and certificate verified that the glass shelves were stored outside the factory due to space constraints, supporting the legitimacy of the goods' movement. The Court concluded that the penalty order did not justify disallowing MODVAT Credit on the finished goods. The grounds raised in the appeal were deemed insufficient to raise substantial legal questions for consideration. Consequently, the appeal was dismissed, upholding the decision to allow MODVAT Credit based on the circumstances presented.

In summary, the judgment addressed the issues of availing MODVAT Credit based on a certificate by the superintendent preventive and the implications of findings related to clandestine removal of goods. The Court upheld the Tribunal's decision, emphasizing the duty-paid nature of the goods and rejecting the department's contentions. The legitimacy of the goods' movement and the absence of substantial legal questions led to the dismissal of the appeal.