2008 (7) TMI 750 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit for goods short-supplied by suppliers.
2. Denial of credit for goods delivered in pallets instead of boxes.
3. Justification for denying Modvat credit on account of packing.

Analysis:

Issue 1: Denial of Modvat credit for short-supplied goods
The Tribunal found that the appellants were denied Modvat credit for goods that were short-supplied by their suppliers. The first ground for denial was that the appellants availed credit even for goods that were short-supplied and for which credit notes were subsequently issued. The Tribunal confirmed the demand of duty amounting to Rs. 2,19,006/- as the reversal of credit was done only after intervention by the Revenue. A penalty of Rs. 20,000/- was imposed on the appellants for this lapse.

Issue 2: Denial of credit for goods delivered in pallets
Around Rs. 6.25 lakhs of credit was denied to the appellants on the basis that the goods, though duty paid by suppliers inclusive of full packing of boxes, were actually delivered in pallets. The appellants received credit notes for deletion allowance. The Tribunal noted the appellant's argument that no refund of duty paid was claimed by the suppliers and that they availed credit for the actual duty paid. The Tribunal emphasized the distinction between credit for "duty paid" and "duty payable."

Issue 3: Denial of Modvat credit on account of packing
The Tribunal agreed with the appellant's contention that the duty paid by the suppliers, inclusive of packing, was availed as credit by the appellants. As the suppliers did not seek re-assessment and the assessable value due to packing could not be varied at the receiver's end, the Tribunal found no justification for denying Modvat credit on this ground. The confirmation of denial and penalty were set aside, except for the penalty of Rs. 20,000/- imposed for the earlier lapse.

In conclusion, the Tribunal confirmed the demand of duty for short-supplied goods but imposed a penalty for the delay in reversing the credit. The denial of credit for goods delivered in pallets was overturned, emphasizing the distinction between duty paid and duty payable. The Tribunal set aside the denial of Modvat credit for packing-related issues, finding no justification for such denial.