2006 (10) TMI 434 - AT - Central Excise

Summary

Issues involved: Disallowance of modvat credit on the ground of probable non-usable inputs and availment of modvat credit on alleged fake invoices.

Summary:

Issue 1: Disallowance of modvat credit on probable non-usable inputs
The case involved the disallowance of Cenvat/Modvat credit on M.S. Rounds/CTD Bars, Sheets/Plates by the Revenue, alleging that the inputs were of prime quality and high value, not usable for the final product of M.S. Ingots. The Commissioner (Appeals) allowed the appeal by modifying the original order, confirming the reversal of credit to a certain extent and dropping the balance amount. The Commissioner (Appeals) held that any input, whether prime quality or high value, if used in the manufacture of the final product directly or indirectly, is eligible for Modvat/Cenvat credit. The materials in question were declared by the appellants for availing Modvat/Cenvat credit, and there was no suppression on their part.

Issue 2: Availment of modvat credit on alleged fake invoices
The Revenue alleged that the appellants availed modvat credit on fake invoices. However, the Commissioner (Appeals) observed that the appellants received the raw materials along with the invoices, recorded them without knowledge of their authenticity, and reversed the credit as soon as they became aware of the issue. The Commissioner (Appeals) noted that the material was physically received in the factory of the appellants, and since the amount was paid prior to the show cause notice, there could be no levy of interest or penalty. The Tribunal rejected the Revenue's appeal, finding it lacking in merits based on the evidence and reasoning presented.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) regarding the eligibility of Modvat/Cenvat credit for the inputs used in the manufacturing process and dismissed the Revenue's appeal concerning the alleged fake invoices and non-receipt of inputs.