2008 (9) TMI 686 - AT - Central Excise

Cenvat/Modvat credit - Waste and scrap - Held that - The statutory provisions do not require that the assessee has to reverse Modvat credit availed on such components which are used in the manufacture of final products and rejected for their being unsuitable - the components (input) in question had been issued for manufacture and in the process of manufacture they were found to be not upto the mark - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of Cenvat credit for rejected components used in manufacturing watches.

The appeal was filed challenging the denial of Cenvat credit amounting to Rs. 9305. The impugned order affirmed the demand under Rule 57-I of the Central Excise Rules, 1944, relating to watch components found unsuitable for watch assembly and subsequently sold as scrap. The Commissioner upheld the demand of input credit for the rejected components. After considering the case records and submissions, it was found that the components issued for watch manufacture were rejected during production as unsuitable for quality watches. These rejected components were then sold as scrap after paying the appropriate duty. The tribunal held that the rejected components should be treated as scrap generated during the manufacturing process. It was emphasized that statutory provisions do not mandate the reversal of Modvat credit on components used in manufacturing final products but rejected for being unsuitable. Consequently, the tribunal concluded that the impugned order was not in line with legal provisions and set it aside, allowing the appeal.

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