2014 (2) TMI 498 - AT - Central Excise

Availment of MODVAT Credit - Credit of duty paid on the inputs lightings - Original adjudicating authority denied credit on the ground that the inputs which were received first by the appellants stand used by them in the manufacture of the final product which are already cleared - Held that - though the adjudicating authority has correctly recorded that there are two conditions which stand imposed by the Tribunal for de novo adjudication but has wrongly added the third condition itself it is equally necessary to prove the existence of in such inputs in tangible physical form . There is no dispute that there was stock of the inputs lying in the appellant s factory as on 01.03.19997 either as such or as contained in their final product. There is also no dispute that such stock was duty paid. The only reason adopted by the adjudicating authority is that the stock of the inputs received by them earlier stands utilised and cleared in the shape of final product - there is justification for adoption of the above legal principle. As long as the inputs are available, as on 01.03.1997 in any shape or condition, the credit involved therein has to be allowed based upon the documentary evidence reflecting upon the payment of duty on the same - Following decision of Hind Lamps Vs. C.C.E., Kanpur 2006 (11) TMI 514 - CESTAT, NEW DELHI - Decided in favour of assessee.

Summary

Issues:
1. Availability of MODVAT credit under Rule 57H.
2. Allowing credit for the transitional period.

Analysis:
Issue 1: The dispute in this case revolves around the availability of MODVAT credit under Rule 57H of the Central Excise Rules, 1944. The appellant, whose final product became dutiable from 01.03.1997, claimed credit for duty paid on inputs in stock as on that date. The original adjudicating authority denied this credit, citing that the inputs used in manufacturing the final product had already been cleared, and thus, the credit claim was rejected based on the principle of first-come first-out.

Issue 2: The Tribunal, in its Final Order, remanded the matter for fresh adjudication, directing the appellants to produce necessary invoices to establish the duty paid character of the inputs. The Commissioner, in the impugned order, again rejected the MODVAT credit and imposed penalties, emphasizing the need to fulfill two conditions for availing the credit: inputs in physical tangible form and establishing their duty paid character. However, the adjudicating authority wrongly added a third condition regarding the physical existence of inputs, which was not mandated by the Tribunal.

Further Analysis: The Commissioner's decision was challenged, arguing that as long as the inputs were available as of 01.03.1997 in any form, the credit should be allowed based on documentary evidence of duty payment. The judgment highlighted a precedent where the Tribunal allowed CENVAT credit for a similar product on the same date. Ultimately, the impugned order denying the credit and penalties was set aside, and all appeals were allowed, granting relief to the appellants. The judgment emphasized the importance of fulfilling the conditions set by the Tribunal for availing MODVAT credit under Rule 57H, without imposing additional criteria beyond what was directed.