1999 (11) TMI 464 - AT - Central Excise

Summary

Issues:
1. Modvat credit availed on returned goods.
2. Validity of documents for Modvat credit.
3. Verification of returned goods.

Analysis:

Issue 1: Modvat credit availed on returned goods
The case involved the appellants removing inputs on payment of duty under Rule 57F(1)(ii) of the Central Excise Rules, 1944, and the recipient returning the goods due to rusting. The credit was taken by the appellants, leading to a show cause notice alleging irregularities in the invoices and credit availed. The Commissioner and Commissioner (Appeals) upheld the confirmation of duty payment. However, the Tribunal noted that the goods were returned under the duty-paying document issued by the appellants themselves. The Tribunal emphasized that if duty had been paid on removal and no other allegations were made, the Modvat credit could not be denied based solely on procedural irregularities.

Issue 2: Validity of documents for Modvat credit
The Tribunal referred to a previous judgment highlighting the peculiar circumstances where the goods were returned to the appellants under the same duty-paying document issued by them. The Tribunal noted that while the gate pass should ideally be in the name of the party claiming Modvat benefit, in this unique situation, the appellants were unable to obtain the gate pass or endorsement due to circumstances beyond their control. The Tribunal emphasized that the goods were duly declared inputs, duty had been paid on removal, and no other allegations were raised against the appellants, warranting the allowance of Modvat credit despite procedural irregularities.

Issue 3: Verification of returned goods
The Tribunal considered the argument regarding the lack of independent verification for the returned goods, especially in the absence of a D-3 procedure. However, the Tribunal noted that documents such as transporters' documents and the R.G. 23A Part-I Register could assist in verifying the actual receipt of the goods. The Tribunal suggested that the Assistant Commissioner could verify the return of goods to the factory based on these documents. Subject to this verification, the appeal was allowed in favor of the appellants.

In conclusion, the Tribunal allowed the appeal, emphasizing that the Modvat credit could not be denied solely based on procedural irregularities when duty had been paid on the inputs and no other allegations were raised against the appellants. The Tribunal highlighted the unique circumstances of the case and the need for proper verification of returned goods to ensure compliance with excise rules.