ORDER
J.H. Joglekar, Member (T)
1. This case involves denial of Modvat credit on the sole ground that the manufacturers’ invoice covering the goods did not have pre-printed serial numbers as required under Rule 52A(6) of the CER, 1944. In addition, for taking wrong credit, a penalty was also imposed on the user manufacturer. The Assistant Commissioner in his order held that the conditions of Rule 52A(6) could not be over-looked even if the manufacturer had some difficulty in preparing a pre-printed invoice. The Commissioner (Appeals), in his order, referred to the common law principle of ‘Caveat Emptor’ and held that the buyer was expected to ensure that the duty paying document, passed the tests stipulated in the relevant rule. He, however, set aside the penalty imposed upon the appellants.
2. The case for the appellant was argued by Shri Sanjay Khatri. Shri D.K. Nayyar, ld. DR represented the Revenue.
3. Shri Khatri’s reliance on the CBEC Circular No. 34/34/94-CX, dated 20-6-1994 in misplaced since Sub-rule (6) was introduced in Rule 52A at a later date. He also urged that the lower authorities had not considered the submissions that due to technical defects, the manufacturers could not pre-print the serial number. He stated that the duty paid nature of the goods was certified by the jurisdictional authorities. It was his case that for a procedural violation, substantive benefit could not be denied. As regards the buyer being beware, it was his submission that the doctrine related to sale of goods, but not to a statutory obligation.
4. Shri Nayyar, on the other hand, states that the requirement of Rule 52A(6) is mandatory, that the Sub-rule was in existence for over one year before the date of impugned invoice and that eligible document under Rule 57G would be only that which is issued in compliance with each provision of the relevant rule, which in this case is Rule 52A. He cited the Supreme Court judgment in the case of Indian Aluminium Co. Ltd. reported in 1991 (55) E.L.T. 454. In submitting that even a procedural condition, if not followed, would go to deny the benefit. Citing the judgment of Durga Steels reported in 1998 (100) E.L.T. 283, he claimed that where there were material defects in the invoice of the Modvat could be denied.
5. I have carefully considered the rival submissions.
6. The wording of Sub-rule (6) of Rule 52A makes it mandatory and obligatory on the manufacture to pre-print the serial number of the invoice. Rule 57G speaks of an invoice issued under Rule 52A as one of the qualifying documents for availing of Modvat credit. Shri Nayyar is quite correct in stating that the invoice must be in terms of the parent rule for Modvat to be availed on its strength.
7. The invoice issued under Rule 52 witnesses the fact that duty where required to be paid, is paid on the goods mentioned therein. It is at once a document covering the transport of the goods as well as transferring the title from the manufacture to the buyer. The various Sub-rules of Rule 52A specify how the invoice is to be made and marked. All such requirements are mandatory since the word “shall” has been used therein. A question would arise whether in case of any violation of any of the provisions of Rule 52 A, the goods shall be deemed to be non-duty paid. So far, there is no instance where the department has demanded duty afresh on the goods covered under a gate pass which gate pass failed to comply with one or some of the prescriptions made in the various Sub-rules of rule in Rule 52A. The ld. DR fairly concedes that he has not come across any such case so far. If the department is not inclined to recover duty once again from the parent manufacturer on the ground that Rule 52A invoice is defective, then the department should not deny the benefit of the Modvat credit to the buyer manufacturer on this ground.
8. The cited judgment of the Supreme Court upholds penal action for procedural violations where there is a possibility of fraud. Here, that possibility is not there since the fact of payment of duty on the goods is certified by the jurisdictional authorities.
9. The Commissioner, in his order, has referred the principle of Caveat Emptor. This was embodied in the erstwhile Rule 57G(2) in the 3rd proviso in the following words:
“Provided also that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which the appropriate duty, as indicated in the documents accompanying the goods, has been paid.”
10. This proviso which had placed an onerous responsibility on the buyer manufacturer was later removed.
11. Based on the analysis above, I hold that in such a situation, there is no cause for denial of Modvat credit to the user manufacturer. The appeal is, therefore, allowed and directions are made for consequential relief.