2006 (9) TMI 67 - AT - Central Excise

Cenvat/Modvat- Revenue contended that appellant ineligible for the credit on brass tubes and accordingly penalty and interest imposed on it- After considering all the factor authority allow the appeal with consequential relief.

Summary

Issues:
1. Denial of Modvat credit on used brass tubes by the authorities.
2. Interpretation of Modvat credit provisions under Central Excise Rules, 1944.
3. Jurisdiction of authorities to reassess duty liability after it has been discharged by the supplier.

Detailed Analysis:
1. The appeal was filed against an order confirming a demand and penalty on the appellant for availing Modvat credit on brass tubes used as capital goods. The appellant cleared worn-out brass tubes to a job worker for conversion into fresh tubes, on which the job worker paid excise duty. The revenue issued a show cause notice denying Modvat credit on the used brass tubes' value. The appellant contended that once duty is discharged by the supplier, authorities cannot reassess the duty. The adjudicating authority and the Commissioner (Appeals) upheld the demand and penalty.

2. The appellant argued that Modvat credit was correctly availed as the duty paid by the supplier was borne by them. They relied on a tribunal decision in Owens Bilt Ltd. v. CCE, Pune. The Revenue contended that the duty liability passed on to the appellant was ineligible Modvat credit, and the job worker should pay duty on the value addition, including job charges.

3. The Tribunal considered both sides' submissions and reviewed the records. It noted that the job worker discharged duty on a value including job charges and the used brass tubes. Modvat credit is allowed if duty is discharged by the supplier on inputs used for manufacturing finished goods. The denial of Modvat credit on the duty paid by the supplier for used brass tubes was unwarranted, as the authorities at the recipient's end cannot reassess the value declared by the supplier. Referring to Owens Bilt Ltd. case, the Tribunal emphasized that once duty is approved by the authorities at the supplier's end, reassessment is beyond the jurisdiction of authorities at the recipient's end. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.