2006 (2) TMI 358 - AT - Central Excise

Summary

Issues: Denial of Modvat credit for carrying forward outstanding credit of 1988.

In this case, the appellant, a manufacturer of iron and steel products, appealed against the denial of Modvat credit amounting to about Rs. 1.4 lakhs. The appellant had outstanding input credit from 1988, which could not be utilized due to the exemption of the final product from duty. The appellant sought to carry forward this credit balance for payment of duty on goods cleared after the re-imposition of duty in 1994. However, the impugned order rejected this claim, stating that the credit was limited to inputs in stock or contained in the final product as of a specified date in 1994, in accordance with Rule 57H. The Commissioner (Appeals) held that the unutilized credit had to lapse and could not be carried forward since the input had been used in the production of exempted goods.

The appellant contended that there was no legal bar to carrying forward the Modvat credit and cited precedents to support their argument. However, the learned SDR argued that Modvat credit is only available for duty paid on inputs used in the manufacture of dutiable goods. In this case, the inputs for which credit was claimed had already been used in the production of exempted goods, making them ineligible for credit according to the learned DR.

The Tribunal held that Modvat credit is indeed available only on inputs used in the manufacture of dutiable goods. Since the revenue had already allowed credit for inputs and final products in stock when the goods became dutiable, no further credit could be claimed for inputs used in the production of exempted goods. The Tribunal found no merit in the appellant's contention and rejected the appeal, stating that the decisions cited by the appellant were irrelevant to the issue at hand. The appeal was dismissed, and the judgment was pronounced in open court.