2007 (10) TMI 57 - AT - Central Excise

Credit - Prime quality material Credit cannot be denied as there is no restriction in Cenvat Rules to use prime quality material in manufacture of final product Moreover, there is no dispute as to receipt, consumption and duty paid character of inputs Credit admissible

Summary

Issues:
1. Denial of modvat credit on prime quality materials used in the manufacturing process.
2. Dispute over the quality of materials procured by the appellant.
3. Interpretation of Cenvat/Modvat credit rules regarding the use of prime quality materials.

Analysis:

Issue 1: The main issue in this case revolves around the denial of modvat credit on prime quality materials used by the appellant in the manufacturing process. The officers found that the appellant procured various materials like M.S. Scrap, turning and boring scrap, ship breaking scrap, CTD bars, MS flats, etc. The authorities alleged that the appellant could not have used prime quality materials for manufacturing final products typically made from scrap. The adjudicating authority and the Ld. Commissioner (Appeals) upheld this view, leading to a show cause notice for denial of modvat credit.

Issue 2: The appellant's advocate argued that the allegations were based on presumption, emphasizing that the materials received were from registered dealers at a price similar to that from the manufacturer. The Ld. SDR contended that prime quality materials like Joists, CTD bars, and MS bars were not suitable for melting purposes, citing a previous decision where the materials were used for re-rolling mills.

Issue 3: The appellate tribunal analyzed the case, noting that the suppliers were registered Central Excise dealers, and the invoices indicated duty-paid goods received and consumed by the appellant. The tribunal found that the denial of modvat credit based on the assumption that prime quality materials could not be used for melting was unfounded. Referring to a previous Division Bench decision, the tribunal ruled in favor of the appellant, emphasizing that as long as there was no dispute regarding receipt, consumption, and duty paid character of the inputs, the benefit of Cenvat credit could not be denied.

In conclusion, the tribunal set aside the denial of modvat credit to the appellant, highlighting that the payment made to the supplier was undisputed. The tribunal also canceled the penalties imposed on the appellant, considering that the major portion of the demand was set aside. The appeals were allowed with consequential relief granted to the appellant.