2003 (7) TMI 535 - AT - Central Excise

Summary

Issues:
1. Disallowance of deemed Modvat credit under Notification No. 58/97-C.E.
2. Interpretation of conditions specified in the notification for availing Modvat credit.
3. Discrepancy in payment method for inputs and its impact on eligibility for credit.

Issue 1: Disallowance of Deemed Modvat Credit:
The case involved the disallowance of deemed Modvat credit to the appellants, who manufactured spades and shovels, for not meeting the conditions specified in Notification No. 58/97-C.E. The appellants had availed of the credit but were denied it due to the payment method not complying with the notification's requirements.

Issue 2: Interpretation of Notification Conditions:
The advocate for the appellants argued that the payment method for inputs, as per the notification, required the manufacturer of final products to make payment directly to the manufacturer of inputs by cheque drawn on their own bank account. The advocate highlighted that the appellants had made payments to suppliers as directed, supported by a certificate from the raw material supplier confirming receipt of payment. Reference was made to a Board Circular emphasizing that Modvat credit should not be denied for minor procedural lapses.

Issue 3: Impact of Payment Discrepancy on Eligibility:
The Revenue contended that the condition of the notification regarding invoicing in the name of the supplier of inputs had not been met, leading to the denial of deemed credit. However, the tribunal noted that the appellants had made payments to different entities on the supplier's direction, with confirmation from the supplier regarding payment receipt. The tribunal held that denial of Modvat credit solely based on the cheque being issued to other companies, as directed by the supplier, was unjustified. It was established that the inputs had suffered duty and were used in the manufacturing process, supporting the appellants' eligibility for deemed credit.

In a detailed analysis, the tribunal examined the specific conditions outlined in the notification for availing Modvat credit and the compliance of the appellants with these requirements. The tribunal emphasized the importance of substance over form in assessing eligibility for credit, considering the actual payment and utilization of inputs in the manufacturing process. Ultimately, the tribunal allowed the appeal, ruling in favor of the appellants and recognizing their eligibility for the deemed credit under Notification No. 58/97-C.E.