Krishna Cold Rolled Sections Ltd. Vs. Commr. of C Ex.

1. The appellants are aggrieved with the order dated 30-11-1995 passed by the Commissioner (Appeals), Allahabad. The appellants are manufacturers of angles, shapes and sections falling under Chapter 72 of the Central Excise Tariff Act, 1985 and availing Modvat facility in respect of inputs used by them in or in relation to the manufacture of the final product under Rule 57A of Central Excise Rules. During the month of April and May, 1994, the appellants availed Modvat credit to the tune of Rs. 44,163/- on the strength of Invoice No. 036 dated 26-4-1994 issued in the name of M/s. Agarwal Steel Corporation, Kanpur and endorsed by them in favour of the appellants. The Superintendent issued a show cause notice dated 2-8-1994 calling upon them to explain as to why the credit wrongly utilised to the extent of the above amount should not be recovered in terms of the proviso to Rule 57-I as there was contravention of Rule 57G of Central Excise Rules, 1944 and they were called upon to explain as to why penalty under Rule 173Q(1)(bb) of Central Excise Rules should not be imposed upon them. The assessee took the plea that both the invoices had been endorsed in their favour (the actual user of inputs) as per practice prevailed prior to 1-4-1994 and credit on such endorsed GP 1 was available to the input user. They had stated that they got endorsed invoice (RUD) just to complete the formalities as prevailed and availability of Modvat credit as such endorsed GP 1 as usual. They also relied on the provisions of Notification No. 15/94 dated 30-3-1994 wherein the Government had described such procedure as : (a) The rate and amount of duty, and such particulars as may be prescribed by the Collector or as may be prescribed by CBEC, (b) Details of Sl. No. and date of and quantity of inputs mentioned in the invoices issued under Rule 52A or as the case may be Bill of Entry and, (c) If issued by the wholesale distributor/dealer the serial No. and date of the invoice issued by the manufacture to the dealer.

Then on such documents are to be treated as bona fide and Modvat credit to be allowed under Rule 57G. They also relied on the Trade Notice No.19/94 which, inter alia, prescribed such procedure as provided under the said notification. They stated that they followed the said procedure inasmuch as both the dealers M/s. Agarwal Steel Corpn., Kanpur and M/s. Aishwarya Steel Supplier, Kanpur issued from the proper dealer Invoice No. 1, dated 26-4-1994 and 10-5-1994 on the strength of original Invoices No. 036, dated 26-4-1994 for 14.770 MT involving duty of Rs. 24,371.00 and Invoice No. 058, dated 9-5-1994 for 12.50 MT involving duty of Rs. 19,792.00, totalling to Rs. 44,163.00. It is stated that the buyer copy of the said invoice was duly enclosed with RT12 for the month of April, 1994 and May, 1994 at the time of filing the RT 12 for the relevant months. They had also submitted the photocopies of such invoices issued by both dealers in support of credit availed by them. They also relied on several other documents.

The Assistant Collector did not agree with the said submissions and held that the endorsement of invoices issued on or after 1-4-1994 is not permissible in terms of the said Notification and Trade Notice and hence he held that Modvat credit on endorsed invoice is to be denied.

Hence, he confirmed the demand and also imposed a penalty of Rs. 7,000/-.

2. The learned Commissioner agree with the said findings. The learned Commissioner has merely held that the appellants had taken the credit on the strength of invoices, which is clear violation of Rule 57G. The learned Commissioner has confirmed the duty demand but however, in the facts and circumstances of the case, he set aside the penalty imposed on them.

3. We have heard the learned Consultant, Shri R.M. Sahai for the appellants and the learned JDR, Shri Ram Sharan for the Revenue.

4. The learned Consultant submitted that there is a substantial compliance of the Notification and the documents produced for defacement as required under Rule 57G(4) of the Rules before the Range Officer prior to issue of the show cause notice. The goods had been actually received and properly utilised in terms of the Rules.

Therefore, Modvat credit cannot be denied and no penalty can be imposed. He also submitted that Modvat credit is not available merely for procedural lapses, technicalities, and the substantive benefit cannot be denied for procedural lapse. He submitted that there is no finding that there is no substantive compliance in this particular matter. He also referred to the defence of the assessee about defacement of the document done by the Range Officer. No discussion had been made by the lower authorities and thus the order is not sustainable in the eye of the law. He also submitted that the issue is covered by several judgments placed in the following list of citations :- 5. The learned DR reiterated the findings given by the lower authorities.

6. I have carefully considered the submissions made by both the sides.

It is noticed that both the authorities have not discussed the defence taken by the assessee and more particularly about substantial compliance of the Notification and the Trade Notice in this matter, although order-in-original records the submissions made by them. The original invoice issued by the dealer has been duly verified and attested by the Superintendent of Central Excise, Kanpur. The accompanying documents have also been duly defaced. These inputs have been properly accounted and the assessee has taken credit only after complying with the provisions of the Notification and the Trade Notice with regard to the utilisation of credit in terms of the Rules. There has been a substantive compliance of the procedure laid down in the Notification and the Trade Notice. Therefore, there is no cause for denying the Modvat credit taken and utilised by the assessee in this matter. The judgments referred to by the assessee also lay down that the Modvat credit cannot be denied so long as substantive compliance has been done by the assessee in terms of the Modvat Rules, Notification issued thereunder. I am fully satisfied on perusal of the documents that there has been no violation of any Rule or Notification and the assessee had correctly availed the Modvat credit. There is no dispute by the department that the assessee has not utilised the declared inputs in the manufacture of final products. The dispute has been restricted only to the technicalities as has been held in the judgments referred to above that Modvat credit cannot be denied for procedural lapses and on account of technicalities.

7. In that view of the matter, taking into consideration the entire evidence and facts and circumstances of the case and in the light of the ratios referred to above, the impugned orders are therefore, set aside and the appeal allowed.