2009 (3) TMI 851 - AT - Central Excise

Summary

Issues:
- Disallowance of Modvat credit and imposition of penalty for availing credit on inputs purchased from registered dealers.
- Interpretation of Rule 2(f) of Cenvat Credit Rules, 2002 regarding "first stage dealers" and their eligibility to issue valid duty paying documents.

Analysis:
1. The case involved appeals arising from a common order regarding the disallowance of Modvat credit and penalty imposition on the appellants for availing credit on inputs purchased from registered dealers. The appellants were engaged in manufacturing pipes and pipe fittings, ingots, moulds, etc., classifiable under Chapter Heading Nos. 73 and 84 of the Schedule to the Central Excise Tariff Act, 1985.

2. The relevant facts indicated that the appellants availed credit against invoices issued by registered dealers, namely M/s. Maheshwari Udyog and Shri Balaji Iron & Steel Traders. The dispute arose as the registered dealers allegedly did not purchase goods directly from the manufacturer, M/s. Rashtriya Ispat Nigam Ltd. The Original Authority disallowed the credit, which was upheld by the Commissioner (Appeals).

3. The appellants' representative argued that the manufacturer issued invoices to M/s. A.S. Steel Traders, who then consigned the goods to the registered dealers. The appellants received the goods with invoices issued by the registered dealers, recorded them in statutory records, and used them in manufacturing final products. The representative cited a Tribunal decision to support their claim.

4. On behalf of the Revenue, it was contended that Rule 2(f) of Cenvat Credit Rules, 2002 defined "first stage dealers" as those purchasing goods directly from the manufacturer. Since the registered dealers did not purchase goods directly in this case, and M/s. A.S. Steel Products, who purchased the goods, were not registered with Central Excise Authorities, the invoices from registered dealers were deemed invalid duty paying documents.

5. The Tribunal analyzed the situation and found that the manufacturer's invoices mentioned the registered dealers as consignees, indicating a direct receipt of goods by the registered dealers. The invoices issued by the registered dealers based on the manufacturer's invoices were considered valid duty paying documents. The Tribunal emphasized the established link between the manufacturer, registered dealers, and the goods received, leading to the decision to set aside the impugned orders and allow the appeals with consequential relief.