2003 (10) TMI 236 - AT - Central Excise

Summary

Issues:
- Disallowance of Modvat credit on defective forgings returned by customers and utilized in re-forging process.

Analysis:
The appellants were engaged in manufacturing steel forgings and availing Modvat credit on inputs. Customers returned defective forgings, reversing Modvat credit. Appellants treated defective goods as inputs, re-forged them for new buyers, and claimed Modvat credit disallowed by lower authorities. The Counsel argued that re-forging process was similar to original forging process, citing previous acceptance of re-manufacture plea. Cited Tribunal decisions supported treating re-manufactured goods as inputs for Modvat credit under Rule 57A.

The SDR contended the factual basis for re-manufacture was inadequate, distinguishing the instant case from cited cases. She argued that the Larger Bench decisions applied only where re-manufacture was proven. The appellants' success in substantiating re-manufacture in an earlier case did not apply to the current situation, according to the SDR.

The Member examined the submissions and noted the forging and re-forging processes were similar, as evidenced by the appellants' own case. The impugned order reproduced the appellants' explanation of re-manufacturing, which aligned with the re-forging process mentioned in the previous order. The Member found the appellants' claim of treating defective forgings as inputs for Modvat credit well-founded, as both forging and re-forging processes were substantially identical. The plea was raised before the lower appellate authority but overlooked. The Member upheld the appellants' case based on the supporting Larger Bench decisions, allowing the appeal and setting aside the impugned order.