2004 (4) TMI 189 - AT - Central Excise

Summary

Issues:
- Eligibility of Modvat Credit on duty paid finished goods received back

Analysis:
The appeal in question pertained to the eligibility of M/s. Biotech Synergy Ltd. for Modvat Credit on duty paid finished goods received back. The appellant, a manufacturer of bulk drugs, had availed Modvat Credit on duty paid inputs under Rule 57A of the Central Excise Rules. The goods in question were returned to the factory after being rejected by consignees, re-processed, and subsequently cleared on payment of Central Excise duty. The Deputy Commissioner disallowed the Modvat Credit, citing non-compliance with Rule 173H and lack of evidence regarding the use of returned goods in the manufacturing process. The Commissioner (Appeals) upheld the decision, stating that the conversion of drugs did not constitute manufacturing. The appellant contended that they had followed the necessary procedures, filed declarations under Rule 57G, and maintained proper records of goods receipt and clearance. They argued that previous tribunal decisions supported their right to claim credit on returned goods.

The appellant's advocate highlighted that the show cause notice was issued solely based on the use of their own invoices for rejected consignments, emphasizing compliance with Rule 57G and proper documentation of goods movement. The Revenue, represented by the learned DR, reiterated the findings of the original order, emphasizing the lack of proof regarding the utilization of returned goods in manufacturing. Upon considering both arguments, the Tribunal noted that the show cause notice was issued on the basis of using own invoices for returned consignments. The appellant had filed proper Modvat declarations, acknowledged by the Department, and maintained records of goods movement and clearance. The Revenue failed to refute these facts or demonstrate that the returned goods were not utilized in the manufacturing process. The Tribunal referenced previous decisions to support the appellant's claim for Modvat Credit on returned goods, ultimately setting aside the impugned order and allowing the appeal.