1996 (6) TMI 241 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit due to moisture loss in goods received as inputs.

Analysis:
The issue in the appeals pertains to the denial of Modvat credit due to the loss in weight caused by moisture loss in the goods received in original packing by the appellants as inputs from their supplier. The lower appellate authority based its decision on a previous Tribunal case and concluded that credit for goods received as input should only be allowed for the quantum actually received, and any subsequent wastage would not alter the credit. The appellant's counsel referred to a clarification issued by the Collector during an open house meeting, stating that Modvat credit should not be denied solely based on invisible losses in inputs. The counsel argued that since the full quantum of fiber was received in the appellant's factory, any loss due to dryage during transit should not affect the entitlement to full credit.

The appellant's counsel contended that the duty paid at the supplier's end for the fiber should be the basis for determining the credit, especially when there was no loss of fiber during transit, only dryage. The counsel emphasized that if any part of the fiber had been lost in transit, the duty would need to be recalculated accordingly. The Departmental Representative acknowledged that there was no claim of fiber loss, only dryage, which he considered a visible loss. Both parties referred to the Collector's clarification, agreeing that it applied to the case.

Upon considering the arguments, the Tribunal noted that the full quantum of fiber supplied by the supplier had been received by the appellants, with some loss due to dryage caused by atmospheric changes. The Tribunal emphasized that under the Modvat scheme, credit is granted for the duty paid on inputs used in manufacturing the finished product. As the full fiber quantity was received without moisture loss, the appellants were entitled to the full duty credit paid by the supplier. The Tribunal distinguished the previous case where there was actual loss of goods during transit, unlike in the present situation. Therefore, the Tribunal held that the lower authority erred in denying the Modvat credit for moisture weight loss during transit and allowed the appeal with consequential relief.