2006 (12) TMI 377 - AT - Central Excise

Summary

Issues: Disallowance of Modvat credit on escalation invoices for capital goods.

Analysis:
The appellant, engaged in manufacturing sugar and molasses, filed an appeal against the disallowance of Modvat credit amounting to Rs. 15,565 on capital goods like transmission gear bush frame, shaft, and Head & Tail shaft. The appellant argued that they had already received Modvat credit on original invoices in 1995 when the goods were received, considered as capital goods. They contended that since credit was allowed on the original invoices, it should also be permitted on escalation invoices. The Department, represented by the learned D.R., supported the findings of the Commissioner (Appeals).

Upon review, the Tribunal noted that the goods in question were received under specific invoices in 1995, classified under sub-heading 8438.90 as sugar mill machinery parts. The Commissioner (Appeals) observed that although the chapter heading was not specified at the time of goods receipt, it was later specified when escalation invoices were issued. It was undisputed that the escalation invoices were related to the capital goods received in 1995, for which credit was admissible. As the department had already allowed credit on the capital goods received in 1995, they could not deny credit on the escalation invoices issued in 1998 for price escalation. Consequently, the Tribunal set aside the impugned order disallowing the Modvat credit of Rs. 15,565 and allowed the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that once credit is allowed on the original invoices for capital goods received, it should also be permitted on escalation invoices related to the same goods. The decision highlighted the principle of consistency in allowing Modvat credit and prevented the department from denying credit on subsequent invoices for the same capital goods.