Full Judgment
2. The relevant facts that arise for consideration are that the appellant availed Modvat Credit on the invoices issued by the dealers/traders during the period July, 1994 to December, 1994. Show cause notices were issued to the appellants denying the Modvat Credit on the ground that these dealers/traders were not registered dealers with the Central Excise department. The appellants contested the show cause notices on the ground that these dealers/traders got themselves registered before 31^st December, 2004 as directed by the Board vide its Circular No. 76/76/94 dated 8.11.94. The Adjudicating authority confirmed the demand on the appellants and imposed penalty. The Commissioner (Appeals), in respect of the credit availed by the appellants on the invoices issued by Indian Oil Corporation, allowed the appeal but in respect of other dealers/traders denied the Modvat Credit and upheld imposition of penalty but reduced the same.
3. Learned Advocate appearing for the appellant submits that the show cause notices were issued for denial of Modvat Credit only on the ground that the dealers/traders were not registered and the order-in-original confirmed the demand of duty on the ground that addresses of the traders were different and duty paying documents did not show the required details, etc. It is his submission that these order-in-original as well as order-in-appeal is traversing beyond the allegation made in the show cause notice. It is his alternative submission that the provisions of Notification 7/99 which amended Rule 57G by inserting Sub-rule (11), empowers the Asst. Commissioner to allow the credit on the inputs and capital goods ignoring minor procedural lapses.
4. Learned D.R. on the other hand submits that the question of allowing Modvat credit on the traders other than Indian Oil Corporation does not arise as in respect of those traders it was found by the Adjudicating authority that the registered address and the invoices' addresses are different and particulars of the original duty paying documents were missing from the invoices. This, in itself, is the requirement of the Notification No. 15/94 as amended from time to time.
5. Considered the submissions made by both sides and perused the record. It is undisputed that the inputs covered under all the 4 orders-in-original were received in the factory of the appellants and consumed by them in their factory. The limited question which is disputed by the lower authorities is regarding the eligibility of Modvat credit on the duty paying documents where the particulars as required were not mentioned. I find that the issue is squarely covered by the Larger Bench decision in the case of Kamakhya Steel Ltd. v. CCE, Meerut . The Larger Bench of the Tribunal in that case has held that minor procedural lapses like non-mentioning of the description of goods, duty paying documents number, registered number, etc. are to be condoned in view of the amendment which was done to Rule 57G by Notification No. 7/99. I also find that the C.B.E.C. vide its Circular No. 441/7/99-Cx dated 23.2.99 had directed the lower authorities as follows: I am directed to refer to Notification No. 7/99-CE (NT), dated 9-2-1999 issued to amend Modvat Rules. The aforesaid notification has been issued to insert Sub-rule (11) in Rule 57G and Sub-rule (13) in Rule 57T of the Central Excise Rules, 1944 so as to empower the Assistant Commissioner of Central Excise having jurisdiction over the factory of the manufacturer to allow credit of duty paid on inputs/capital goods ignoring minor procedural lapses in falling the declaration or in the invoice/document based on which credit is to be taken. However the Assistant Commissioners should ensure that inputs/capital goods have suffered duty and are being used/are to be used in the process of manufacture. The Assistant Commissioner is also required to record the reasons in file for allowing Modvat credit in each case.
2. The Assistant Commissioner, before issuing Show Cause Notice for wrong availment of Modvat credit by the assessee on any procedural grounds, shall conduct enquiries with regard to duty paid nature of the goods as the suppliers send, ensure that necessary information as mentioned in the Notification are available on the invoice and satisfies himself whether the goods have been used or are intended to be used as contemplated in the Modvat Rules. In case the assessee's invoice contains the details viz. description of the goods, assessable value, name and address of the factory or warehouse where the goods are to be received, and if the assessee has filed a declaration as contemplated in the Modvat rules, the Assistant Commissioner having jurisdiction over the factory would allow the credit of duty so paid after making enquiries as above.
3. It should hereafter be ensured that Show Cause Notices are not issued for procedural lapses as mentioned in the Notification without making proper enquiries. Wherever the Assistant Commissioner, after making due enquiry; is satisfied that the Modvat credit taken by the assessee is incorrect, adjudication proceedings in the normal course should be initiated. Efforts, however, should be directed toward reduction of litigation.
From the plain reading of the above Board's Circular it is very clear that the Asst. Commissioner should ignore minor procedural lapses as long as it is verified that inputs/capital goods have suffered duty and are being used in the manufacturing process. The Board in the above Circular at point No. 4 had clearly mentioned for disposal of pending cases accordingly. I find that the Commissioner (Appeals) while disposing of the appeal on 25.5.2004, should have considered the Board's Circular while dismissing the appeals filed by the appellants.
Accordingly, to my mind, the appellants demonstrated that they have received the duty paid inputs and consumed the same in their factory, hence, they are eligible for Modvat credit. The appeal is disposed of on merits, without going into the issue of orders of lower authorities are traversing beyond the allegations in show cause notice.
6. In view of the facts and circumstances as mentioned above the impugned order is liable to be set aside and I do so. Appeals are allowed with consequential relief, if any.