Tribunal allows Modvat credit for capacitor manufacturers following circular on direct supply to job workers

The Tribunal allowed the appeals, setting aside the order denying Modvat credit to the capacitor manufacturers. The appellants were found entitled to the credit as they followed the circular permitting direct supply of raw materials to job workers outside the factory. The invoices were in the appellants' name with job workers as consignees, in line with the circular's provisions, leading to the reversal of the denial of Modvat credit.

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Issues:
Appeal against order-in-appeal passed by Commissioner (Appeals) regarding denial of Modvat credit under Notification No. 84/94-C.E. for sending raw material directly to job workers without bringing it into the factory.

Analysis:
The appellants, engaged in capacitor manufacturing, were availing Modvat credit under Notification No. 84/94-C.E. which exempts duty for small-scale manufacturers sending raw material to job workers outside the factory. Show cause notices were issued for denying Modvat credit as raw material was sent directly to job workers. The adjudicating authority upheld the demands and penalties. Commissioner (Appeals) dismissed appeals citing lack of provision for direct movement of goods to job workers. Appellants argued they followed necessary procedures, declared job workers' names, and relied on a circular allowing direct supply to job workers.

The main contention was Modvat credit denial due to direct supply to job workers. Appellants submitted declarations under Notification No. 84/94-C.E., mentioning raw material supply to job workers without bringing it into the factory. They also provided invoices with job workers as consignees. The Circular dated 12-9-95 by Central Board of Excise and Customs permitted direct supply to job workers. The Notification stated that in cases where inputs are supplied to job workers on another manufacturer's instructions, the consignee would be the job worker. In this case, invoices were in the appellants' name with job workers as consignees, entitling them to Modvat credit as per the circular.

The Tribunal found the appellants entitled to Modvat credit as per the circular's provisions. Invoices were issued in the appellants' name with job workers as consignees, aligning with the circular's guidelines. Therefore, the impugned order denying Modvat credit was set aside, and the appeals were allowed.

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