1996 (9) TMI 406 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat credit based on duplicate gate passes.
2. Disallowance of deemed Modvat credit for inputs cleared directly from the manufacturer's factory.
3. Denial of Modvat on foundry fluxes chemicals used in the preparation of moulds.

Analysis:

Issue 1: The first issue revolves around the objection raised by the Assistant Commissioner regarding the availment of Modvat credit based on duplicate gate passes, which were not considered as prescribed documents under Rule 57G(2) for evidencing duty payment on inputs. The Commissioner (Appeals) directed a comparison between the duplicate and original gate passes to resolve this matter.

Issue 2: The second issue concerns the disallowance of deemed Modvat credit for inputs cleared directly from the manufacturer's factory, under the assumption that they were exempt from duty payment. The Tribunal referred to a Larger Bench decision, emphasizing that the denial of deemed credit can only be lawful if the Department proves that the inputs were cleared duty-free under a specific exemption notification. In this case, the Department failed to establish such clearance, rendering the denial of deemed credit unsustainable.

Issue 3: The third issue involves the denial of Modvat on foundry fluxes chemicals used in mould preparation, on the basis that they were not directly related to the manufacture of the final product, valves, and cocks. The Tribunal, citing a previous decision, held that these chemicals were indeed eligible inputs under Rule 57A and that the denial of Modvat credit without verifying whether the exemption conditions were met was unjustified.

In conclusion, the Tribunal upheld the eligibility of foundry fluxes for Modvat credit, emphasized the need for proper verification before denying deemed credit, and supported the direction given by the Commissioner (Appeals) to grant Modvat credit after verifying the gate pass particulars. The appeals were disposed of in favor of the respondents, highlighting the importance of adherence to legal provisions and due process in the availment of Modvat credit.