2005 (5) TMI 408 - AT - Central Excise

Appeal partially allowed on Modvat credit at job worker's premises, dismissed on yarn in fabric. Procedural compliance crucial

The Tribunal partially allowed the appeal regarding Modvat credit on inputs at the job worker's premises but dismissed the appeal concerning Modvat on ... Cenvat/Modvat - Yarn used in the manufacture of fabric Issues Involved:Denial of Modvat credit on inputs at job worker's premises and duty paid on yarn contained in fabric.Analysis:1. Admissibility of Modvat Credit on Inputs at Job Worker's Premises:The appellants, engaged in manufacturing Nylon tyre cord fabrics, opted for the Modvat scheme. They filed declarations under Rule 57G and Rule 57H of the Central Excise Rules to avail Modvat credit on inputs and finished goods. The Revenue issued show cause notices proposing to deny the credit, leading to Orders-in-Original disallowing the credit. The first appellate authority passed two orders, allowing credit on inputs with the job worker in one order and denying credit on duty paid yarn contained in fabric in the other. The appellants challenged these findings, arguing that one-to-one correlation of goods supplied is not necessary as the inputs were at the job worker's premises. They also contended that yarn is an input as per Rule 57A, irrespective of declaration under Rule 57G. The Tribunal held that the appellants were entitled to credit on inputs at the job worker's premises, partially allowing the appeal.2. Admissibility of Modvat on Yarn Contained in Fabric:The Commissioner (Appeals) denied Modvat credit on duty paid yarn contained in fabric, stating that the appellants did not receive yarn but fabric, and there was no evidence of duty payment on yarn. The Commissioner emphasized that Rule 57H allows credit on inputs received by a manufacturer, and since yarn was neither an input nor received by the appellants, credit on yarn was disallowed. The Tribunal upheld this decision, highlighting the lack of evidence of duty payment on yarn and the difficulty in verifying the duty paid nature of inputs used in fabric manufacture. The Tribunal dismissed the appeal related to Modvat on yarn contained in fabric, affirming the Commissioner (Appeals)'s decision.In conclusion, the Tribunal partially allowed the appeal concerning Modvat credit on inputs at the job worker's premises but dismissed the appeal regarding Modvat on yarn contained in fabric. The judgment emphasizes the importance of compliance with procedural requirements and the need for clear evidence of duty payment to avail Modvat credit on inputs, maintaining a strict interpretation of the relevant rules and definitions.