2004 (5) TMI 501 - AT - Central Excise

Summary

Issues: Availability of Modvat credit on rejected goods used as inputs.

In this appeal, the appellants challenged the order-in-appeal passed by the Commissioner (Appeals) regarding the availability of Modvat credit on rejected goods received from buyers and used as inputs for manufacturing final products. The appellants, engaged in manufacturing automotive air-conditioners, availed Modvat credit on rejected goods received under duty paying documents during August 1999 to November 2000. The adjudicating authority initially allowed the credit, but the Commissioner (Appeals) reversed this decision.

The appellants received defective goods back from buyers under valid duty paying documents, due to damage during transit, and used these rejected goods as inputs for manufacturing final products. The case of the appellants aligned with a precedent set by the Tribunal in Commissioner of Central Excise, Meerut v. Tin Manufacturing Company, where defective duty paid containers were remade into new ones and used as inputs, allowing Modvat credit as per Rule 57A and a relevant Circular. No contradictory judgment was presented by the Department. Thus, the Tribunal concluded that the Commissioner (Appeals) erred in disallowing Modvat credit on rejected goods used as inputs, setting aside the impugned order and allowing the appeal of the appellants with any consequential relief under the law.