2004 (1) TMI 129 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit to the appellants for disputed periods (May 1998 to December 1998) and April 1999 to July 1999.

Analysis:
The judgment delivered by Shri P.S. Bajaj, Member (J), of the Appellate Tribunal CESTAT, New Delhi, addressed the issue of denial of Modvat credit to the appellants for the mentioned periods. The grounds for denial included the manufacturer not fully discharging the duty liability and the goods not being received directly from the manufacturer. However, the tribunal found these grounds legally untenable. The appellants had purchased goods through duty paid invoices with certification that duty had been discharged by the manufacturer under Rule 96ZP(3). There was no evidence to prove the certificate false, and no action had been taken against the manufacturer for duty recovery. Therefore, as bona fide purchasers, the appellants were entitled to Modvat credit.

Another ground for denial was that the goods were not directly purchased from the manufacturer, as required by Notification No. 58/97. The appellants, a government undertaking, placed orders through Indian Iron and Steel Co. Ltd., who further directed suppliers like M/s. Karam Steel Corporation. The tribunal considered this arrangement as the appellants purchasing from the manufacturer, with Indian Iron and Steel Co. Ltd. acting as an agent. The use of the intermediary did not disqualify the appellants from claiming Modvat credit, especially when there was no dispute about receiving dutiable goods and using them in final products.

Based on the detailed analysis, the tribunal set aside the impugned order and allowed both appeals of the appellants, granting consequential relief as permissible under the law. The judgment clarified the legal basis for allowing Modvat credit to the appellants despite the challenges raised by the department, emphasizing the bona fide nature of the purchases and the practicalities of government undertakings' procurement processes.