2004 (7) TMI 573 - AT - Central Excise

Summary

Issues:
- Disallowance of Modvat credit in respect of inputs received from Paonta Sahib Unit
- Whether the activity undertaken by the manufacturing unit amounts to manufacture

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi pertained to the disallowance of Modvat credit in respect of inputs received from Paonta Sahib Unit. The Revenue filed the appeal against the order passed by the Commissioner (Appeals) where the benefit of Modvat credit was disallowed on the grounds that the Paonta Sahib Unit had not paid duty on the inputs. The inputs were initially manufactured at Paonta Sahib Unit and then sent to Mohali Unit. The Mohali Unit availed the credit but later returned the defective goods to Paonta Sahib Unit, reversing the credit. The Paonta Sahib Unit, after re-processing, cleared the inputs without payment of duty. Subsequently, Mohali Unit again took Modvat credit upon receipt of the inputs.

In a separate show cause notice, the Paonta Sahib Unit was demanded duty for the re-processed goods, but the Tribunal's earlier order set aside the demand, stating that the processes undertaken by the manufacturing unit did not amount to manufacture. The present proceedings focused on the Mohali Unit, where a show cause notice was issued, denying the Modvat credit for the same goods due to the manufacturing unit not paying duty on the re-processed goods. The Tribunal found that since the demand for the manufacturing unit was set aside on the grounds that the processes undertaken did not amount to manufacture, the denial of credit for the same goods to the Mohali Unit was also not sustainable. Consequently, the Tribunal upheld the impugned order, dismissing the appeal.