1991 (10) TMI 160 - AT - Central Excise

Summary

Issues:
1. Sustainability of credit taken on an input "Steel sheet" under MODVAT rule.
2. Interpretation of Rule 57-G(2) regarding direct receipt of input at the manufacturer's place.
3. Applicability of Notification 351/86 retrospectively.
4. Burden of proof on the appellant to establish the identity of the input.
5. Consideration of Notifications 214/86 and 351/86 in the context of MODVAT credit.
6. Impact of sending inputs directly to the job worker's premises on MODVAT credit eligibility.

Analysis:

The appeal challenged the order of the Collector of Central Excise (Appeals) regarding the sustainability of credit taken on a "Steel sheet" input under MODVAT rule. The appellant contended that Notification 351/86 clarified that inputs could be sent to the job worker's premises for processing, even if not directly received at the manufacturer's place. The appellant argued that the notification should apply retrospectively, covering the period in question. The appellant also highlighted that the job worker had availed exemption under Notification 351/86, supporting their claim for MODVAT credit. However, the S.D.R. argued that the appellant failed to prove the identity of the input in question, casting doubt on the claim's validity.

The Tribunal acknowledged the burden on the appellant to establish the input's identity after being sent to the job worker and returned to the factory. Recognizing the lack of evidence, the Tribunal set aside the impugned order and referred the matter back to the original authority for further consideration based on the appellant's evidence and in compliance with the law. This decision emphasized the importance of proving the input's journey and identity for claiming MODVAT credit.

Regarding the interpretation of Notifications 214/86 and 351/86, the Tribunal noted that MODVAT credit eligibility hinged on the input reaching the manufacturer of the final product, as per Rule 57-A. The appellant's practice of sending inputs directly to the job worker's premises raised concerns about compliance with Rule 57G(2). Despite the literal interpretation by the lower appellate authority, the Tribunal recognized the evolving practice accepted by the Department, allowing MODVAT credit even when inputs were sent to the job worker directly. The Tribunal emphasized the need to focus on the relief against duty cascading and upheld the appellant's eligibility for MODVAT credit, provided the input's identity at the job worker's premises was established.

In conclusion, the Tribunal highlighted the unchanged wording of Rules 57A and 57G despite Notification 351/86, emphasizing the broader perspective of the MODVAT credit scheme to prevent duty cascading. The decision supported the practice of sending inputs directly to job workers' premises and allowed MODVAT credit if the input's identity was proven. The matter was remanded to the original authority for reevaluation, considering the inputs' use in manufacturing intermediate products sent to the appellant's factory, in line with the Tribunal's observations and the evolving practice recognized by the Department.