2002 (9) TMI 123 - HC - Central Excise

Summary

Issues:
Challenge to show cause notices for wrongly availing Modvat credit.

Analysis:
The petitioners challenged three show cause notices issued by the respondents questioning the availing of Modvat credit. The petitioners, engaged in manufacturing final products under specific chapters of the Central Excise Tariff, had informed the authorities about their entitlement to Modvat benefits in 1986. Subsequently, they filed declarations for availing Modvat credit, which were accepted by the excise authorities without any objections. However, the respondents issued show cause notices alleging that the petitioners did not properly describe the inputs in their declarations as required under Rule 57A of the Central Excise Rules. The petitioners contended that since there was no specific format prescribed for declarations under Rule 57G(1), their declarations were valid, and all Modvat conditions were met. They argued that the show cause notices were unjustified, especially considering the acceptance of their declarations in the past.

In response to the petition, the revenue contended that the petitioners could raise their arguments during adjudication and that there was no need for interference at the show cause notice stage. The court sought clarification from the revenue on whether the denial of Modvat benefit was due to a technical breach or a lack of merit. The revenue admitted that without adjudication, they could not make a definitive statement. The court held that since the petitioners' declarations were accepted previously, the revenue could not deny Modvat credit based on a defective declaration, especially when no specific format was prescribed by the statute. The court noted that there was no evidence of the petitioners being asked to revise their declarations in a specific format. Consequently, the court quashed the show cause notices that sought to deny Modvat benefits based on declaration format issues but allowed the revenue to adjudicate the Modvat credit's admissibility on merit.

In conclusion, the court partially allowed the petition, setting aside the show cause notices that questioned the Modvat benefits based on declaration format issues. The respondents were directed to adjudicate the matter on merit after giving the petitioners a chance to respond. The petition was disposed of with no order as to costs.