2004 (6) TMI 476 - AT - Central Excise

Summary

Issues:
- Dispute over Modvat credit on imported metal brass scraps
- Allegations of failure to follow proper procedures under Central Excise Rules
- Denial of Modvat credit and recovery of irregularly availed amount
- Appeal against Commissioner's order regarding Modvat credit denial

Analysis:
1. The dispute in this case revolves around the availability of Modvat credit on imported metal brass scraps by the manufacturer of excisable goods. The issue arises from the alleged failure of the respondents to follow proper procedures under Central Excise Rules, including obtaining permission for sending goods directly to job workers and effecting clearances under prescribed documents. The Modvat credit amounting to Rs. 2,49,60,001/- was deemed irregular and recoverable due to procedural lapses.

2. The Commissioner, after considering submissions and case laws, concluded that substantial Modvat benefit had accrued and should not be denied on technical grounds. The denial of credit for scrap claimed as unfit for further manufacture was also rejected, as the unfit material was cleared by paying duty. The Commissioner disagreed with the propositions in the show cause notice regarding duty payment and credit availed on imported inputs. The Board directed an appeal against the Commissioner's decision under Section 35E(1) of the Central Excise Act, 1944, arguing that the credit availment was improper due to goods not being received under prescribed documents.

3. The Tribunal noted that the imported inputs were received in the Bhiwandi godown, sorted, and then brought to the factory for manufacturing. The Commissioner accepted the clearance of scrap at a lower value for unfit material, citing precedent judgments. While the objection of non-receipt of material in the factory was acknowledged, it was established that duty payment and utilization in manufacturing processes were in order. The only procedural lapse was the failure to generate internal challans for material movements between premises, but the utilization of input material for final goods production was not disputed, justifying the Modvat claim.

4. Ultimately, the Tribunal found no reason to interfere with the Commissioner's order, rejecting the revenue's appeal. The decision was based on the proper utilization of input material for manufacturing final goods despite procedural shortcomings in generating internal challans. The Tribunal upheld the acceptance of scrap clearance at a lower value for unfit material and affirmed that the Modvat credit should not be denied based on technicalities when the material was effectively utilized in the manufacturing process.