2009 (1) TMI 633 - AT - Central Excise

Summary

Issues:
- Entitlement to avail Modvat credit for inputs purchased on behalf of principal manufacturer and recovered through sale invoice.

Analysis:
The judgment deals with the issue of whether the appellant, acting as a job worker of bulk drugs, is entitled to avail Modvat credit for inputs purchased on behalf of the principal manufacturer and recovered through a sale invoice. The appellant procured some inputs from another manufacturer using central excise invoices and claimed credit for the duty paid on these inputs. The revenue contended that since the appellant raised a sale invoice for these inputs to the principal manufacturer, it implied a sale transaction, thereby disentitling the appellant from availing the Modvat credit.

Upon considering the arguments, the Tribunal found that the appellant had indeed purchased the inputs on behalf of the principal manufacturer, who could have directly bought and transferred them to the appellant's factory. The subsequent issuance of sale invoices was merely a mechanism to recover the cost from the principal manufacturer. The Tribunal held that this process did not affect the appellant's entitlement to the Modvat credit, as the inputs had been received at the appellant's factory under central excise invoices, and the credit was rightfully availed based on these invoices.

The Tribunal disagreed with the revenue's contention and concluded that there was a prima facie case in favor of the appellant. It allowed the stay petition, indicating a preliminary finding that the appellant was entitled to avail the Modvat credit for the inputs purchased on behalf of the principal manufacturer and recovered through the sale invoice. The judgment emphasizes the importance of the actual flow of inputs and the rightful availing of credit based on valid documentation, rather than the subsequent recovery mechanism employed by the appellant.