1996 (3) TMI 277 - AT - Central Excise

Summary

Issues: Denial of modvat credit on damaged goods received back, failure to intimate the Department, validity of taking modvat credit based on gate pass not in appellant's name.

Analysis:

The appeal involved the denial of modvat credit amounting to Rs. 11,123 on damaged goods received back by the appellants. The appellants, engaged in manufacturing steel wire and Auto Tyre Bead Wire, procured wire rods and wire for production. The Department alleged that modvat credit was not available as the appellants did not inform the Department about the receipt of duty-paid goods back to their factory.

The appellant's advocate argued that the goods received back were declared as inputs under Rule 57G, making them eligible for modvat credit. Citing various Tribunal judgments, the advocate emphasized that damaged goods used as inputs were still eligible for modvat credit. The advocate also highlighted that the statutory records and RT 12 returns served as intimation to the Department regarding the receipt of such goods.

The Department, represented by the SDR, contended that no formal intimation was sent to the Department about the receipt of damaged goods. The SDR argued against allowing modvat credit based on a gate pass not in the appellant's name and emphasized that most cited judgments pertained to rejected goods, not damaged goods.

Upon review, the judge found evidence that the appellants had sought permission for receiving back rejected goods in the past. However, in this case, the issue concerned damaged goods in transit. The judge noted that the goods were not declared as inputs under Rule 57G and, therefore, modvat credit was not admissible. The judge clarified that even if the goods were damaged in transit, the duty-paid character remained unchanged, making them ineligible for modvat credit.

Regarding the gate pass issue, the judge reiterated that the goods were declared as inputs, and the duty was paid on them, regardless of being received back as damaged. Therefore, the absence of the appellant's name on the gate pass was deemed immaterial in this context.

In conclusion, the judge held that the appellants were entitled to take modvat credit on the damaged goods received back. The impugned order denying the credit was set aside, and the appeal was allowed, with any consequential relief to be granted in accordance with the law.