1997 (8) TMI 208 - AT - Central Excise

Summary

Issues:
- Dispute over Modvat credit availed by the appellants
- Allegation of contravening provisions of Rules 57A and 57G
- Interpretation of Notification No. 217/86 regarding Modvat credit
- Classification of inputs for final products under different sub-headings
- Procedural lapse in declaring inputs separately
- Collector's observation on inputs and declaration discrepancies
- Applicability of Rule 57D(2) on intermediate products
- Justification for disallowing Modvat credit and imposing penalty
- Tribunal's decision on the appeal and consequential benefits

Analysis:
The case involved M/s. Haryana Concast Ltd. appealing against the Order-in-Original passed by the Collector, Central Excise, New Delhi, directing the recovery of Modvat credit and imposing a penalty. The appellants were engaged in manufacturing steel products and claimed Modvat credit on inputs used for their final products. The dispute arose when the Department alleged that the appellants had not correctly declared the inputs separately for different final products falling under various sub-headings, contravening Rules 57A and 57G.

The appellants contended that they were entitled to Modvat credit under Notification No. 217/86 for using steel billets and ingots in their Rolling Mill for producing final products like CTD bars. They argued that the inputs were intermediate products and should be considered for credit. However, the Collector observed discrepancies in the declaration, noting that re-rollable scrap was not directly used for final products like CTD bars, leading to the disallowance of Modvat credit.

During the proceedings, the appellants emphasized that they had not willfully mis-declared inputs and that the inputs and final products fell under the same Chapter, complying with Rule 57A. The Collector and the Respondent maintained that the credit was rightly disallowed due to the misdeclaration of inputs. However, the Tribunal, after careful consideration, referred to previous judgments and held that steel billets and ingots could be considered intermediate goods under Rule 57D(2) if used in the manufacturing process of final products.

Based on the Tribunal's interpretation and the cited precedents, the appeal was allowed, setting aside the Collector's order and providing consequential benefits to the appellants. The Tribunal found no justification for imposing a penalty as there was no evidence of willful misdeclaration to evade duty. Ultimately, the appellants succeeded in their appeal, securing the rightful Modvat credit on the inputs used for their manufacturing processes.