2002 (9) TMI 212 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credits on inputs under Rule 57-I
2. Imposition of penalty under Rule 173Q

Analysis:
1. The appeal challenged the disallowance of Modvat credits totaling Rs. 2,40,000 on inputs under Rule 57-I and the penalty of Rs. 10,000 imposed by the original authority. The Commissioner (Appeals) upheld the disallowance based on two show cause notices dated 22-5-95 and 26-5-95. The first notice proposed to deny Modvat credit of Rs. 1,66,000 due to lack of pre-authenticated dealer invoices with pre-printed serial numbers. The second notice sought to disallow Rs. 74,000 of Modvat credit for the same reason and the failure to provide evidence of invoice serial number intimation to the Assistant Commissioner. The original authority upheld these grounds and imposed the penalty, a decision affirmed by the lower appellate authority.

2. The counsel for the appellants argued that the Commissioner (Appeals) erred in not recognizing the pre-authentication of invoices and the admissibility of Modvat credit without pre-printed serial numbers, citing a relevant Tribunal decision. They contended that any omission in serial number intimation was the dealer's fault, not a basis to deny Modvat credit. Additionally, they argued that Notification No. 64/94-C.E. (N.T.) did not apply as the dealer was registered. The counsel emphasized that all substantive requirements for Modvat credit were met, and the inputs were duly declared and utilized in manufacturing final products. The JDR defended the Commissioner (Appeals) findings.

3. Upon review, the appellate authority found the denial of Modvat credit based on lack of pre-printed serial numbers invalid, aligning with the Tribunal's precedent. The only upheld ground was the failure to apply for invoice acceptance under Notification No. 64/94-C.E. (N.T.) and lack of evidence on serial number intimation to the Assistant Commissioner. However, these were deemed irrelevant as the substantive requirements of Rule 57A were fulfilled, with duty-paid inputs utilized in manufacturing without dispute. The non-intimation of serial numbers was considered extraneous to Modvat credit entitlement, especially as the invoices were from registered dealers. Consequently, the Commissioner (Appeals) order was set aside, and the appeal was allowed.