2003 (1) TMI 624 - AT - Central Excise

Appellate tribunal grants relief to appellants on Modvat credit dispute, rejects Revenue's position.

The appellate tribunal allowed the appeal by the appellants regarding Modvat credit on inputs consumed before opting out of the scheme. The tribunal ... Modvat credit - reversal of Modvat credit on opting out - treatment of inputs consumed prior to opting out - principle of first come first outModvat credit - principle of first come first out - treatment of inputs consumed prior to opting out - reversal of Modvat credit on opting out - Whether inputs consumed by the appellants prior to 1-4-2000 must be treated as drawn from the consignment for which Modvat credit was not availed (applying a 'first come first out' principle), thereby requiring reversal of credit availed later. - HELD THAT: - The Tribunal rejected the authorities' application of the 'first come first out' principle. The court held that it is not possible to segregate physical use of inputs between consignments in the manner adopted by the lower authorities. Where the assessee had validly availed Modvat credit on receipt of certain inputs and had used inputs (and the credit) up to the date of opting out, the Revenue cannot compel treatment of such use as attributable to a different consignment on which credit was not availed. There is no justification for deeming the Modvat credit to have remained idle in stock and for insisting that consumption be charged against non-creditable inputs. On this basis the impugned order directing reversal of credit was set aside and the appeal allowed with consequential relief to the appellants.Impugned order set aside; appeal allowed and reversal of Modvat credit on account of applying 'first come first out' rejected.Final Conclusion: The Tribunal allowed the appeal, holding that consumption of inputs prior to 1-4-2000 cannot be treated as drawn from non-Modvat consignments so as to require reversal of Modvat credit; the impugned order is set aside and consequential relief granted to the appellants. The appellate tribunal allowed the appeal by the appellants regarding Modvat credit on inputs consumed before opting out of the scheme. The tribunal disagreed with the Revenue's view of treating the consumed inputs out of non-modvatable inputs and held that the Modvat credit used by the appellants should not be deemed to have been lying in their stock. The impugned order was set aside, and the appeal was allowed with consequential relief to the appellants.