2007 (8) TMI 246 - HC - Central Excise

Defected goods received back - Whether goods received by the party under cover of their own invoice originally issued at the time of clearance of such goods are valid documents for availing of credit u/r 57-A - held that the defective/rejected final products returned to the manufacturers and used in or in relation to the manufacture of final products are eligible inputs for the purpose of credit revenue plea that D-3 intimation not filed is rejected

Summary

Issues:
1. Admissibility of Modvat credit on rejected goods under Rule 57-A.
2. Compliance with procedures under Rule 51-A of the Central Excise Rules, 1944.

Analysis:
1. The case involved a dispute regarding the admissibility of Modvat credit on rejected goods under Rule 57-A of the Central Excise Rules. The Tribunal referred two questions of law for opinion, specifically addressing the admissibility of Modvat credit when goods were returned to the party's unit without following prescribed procedures. The Tribunal allowed the appeal filed by the Firm, which was contested by the Revenue.

2. The facts of the case revealed that the party in question, engaged in the manufacture of Polyster film, availed Modvat credit during specific periods. Show cause notices were issued alleging irregularities in availing Modvat credit on rejected returned goods without following proper procedures. The Deputy Commissioner confirmed the demand and imposed penalties, which were partially upheld by the Commissioner (Appeals) but later overturned by the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi.

3. Upon reviewing the case, the High Court found that the questions framed in the Reference Application had been correctly addressed by the Tribunal. The Court concurred with the Tribunal's decision that defective/rejected final products returned to the manufacturers and used in or in relation to the manufacture of final products qualified as eligible inputs for Modvat credit. The Tribunal had granted the appellants unconditional waiver of pre-deposit of duty and penalty, which the High Court deemed appropriate.

4. Ultimately, the High Court upheld the decision of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi, finding no infirmity or illegality in their ruling. The Reference Application was disposed of in favor of the Firm against the Revenue, affirming the Tribunal's order dated 13.07.2000.