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TMI Blog2006 (8) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner (Appeals) with a prayer that the disallowance of Modvat credit of Rs. 46,631/- be set aside and the respondent be allowed to retake credit thereof along with interest amount of Rs. 3,648/- got deposited through TR-6 challan. 2. The assessee was engaged in manufacture and clearance of sugar and molasses and availed the facility of Cenvat credit under Rule 57AB of Central Excise Rules, 1944 read with Rule 57AA thereof. On scrutiny of the Cenvat credit records for the month of April, 2001 to May, 2001, it was noticed by the revenue officer that the assessee had availed credit to the tune of Rs. 24,821/- wrongly, because the items mentioned at serial Nos. 1 to 4 of Annexure-1 to the show cause notice were in respect of free su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were put to use, was not sustainable. 4. The adjudicating authority found that in the instant case, the assessee had received identical capital goods of the description given in the concerned invoices of the earlier period on which Cenvat credit was already taken. Thereafter, since the goods were defective, the supplier replaced their earlier goods free of charge on the complaint being made by the assessee. The assessee took Cenvat credit again on these replaced capital goods. It was therefore, held that double credit was taken in respect of both, the consignments, of identical capital goods which were defective as well as on the replaced goods. It was held that the assessee was not entitled to take credit on the capital goods received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was observed that the Modvat scheme was specifically for reducing the cascading effect of duties paid on inputs used in the manufacture of dutiable finished goods and the cascading effect would arise only if the manufacturer of the finished goods paid the duty on the inputs. When no duty was paid by the manufacturer of the finished goods to the manufacturer of the inputs, and the goods were received free of cost and duty free he could not have cleared any duty burden which was required to off set by resorting to the Cenvat scheme. It was, therefore, held that the denial of the second Cenvat credit of duty not paid by the assessee was in order. The learned Commissioner (Appeals) in respect of the assessee's having taken 100% credit instea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were duty paid goods, the assessee was entitled to take Modvat credit even in respect of these goods. He placed on record copy of the invoice No. 21046, dated 6-9-2000 to point out therefrom that, the goods mentioned therein were supplied free and that Central excise duty was paid on those goods by the supplier as shown in the invoice. In this invoice the particulars of the goods are described as Misc. items as per attached packing slip (Chapter No. 8406-10) . There is no indication in the invoice that the goods replaced were for the earlier corresponding defective goods. However, it is the assessee's own case that all these freely supplied goods were in lieu of defective goods and the supplier had as per the guarantee/warranty condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiving back the defective goods would be able to take credit. Though the learned authorised representative for the assessee has argued on the footing that all the goods replaced were capital goods for the similar defective capital goods, the invoices, particularly the one which mentions miscellaneous items , do not throw light on that aspect. The Commissioner (Appeals) has described the goods as inputs. It was necessary for the appellate authority to have examined the question whether the defective goods were in fact used and give a definite finding thereon, because, if they were replaced being defective, ordinary, they could not have been used, and if they were used they would ordinarily not have been defective. This aspect has escaped no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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