Modvat credit upheld despite procedural lapses on factory shifting & job worker inputs

The Tribunal held that Modvat credit could not be disallowed for duty paid on inputs due to factory premises shifting, as the inputs had suffered duty and were used in manufacturing despite a procedural lapse in filing a fresh declaration. Additionally, the disallowance of Modvat credit for inputs sent to a job worker was overturned because the correct procedure was followed, even though the inputs were recorded in the books but not utilized immediately. The appeal was allowed in both instances, with the Tribunal finding no valid reason to disallow the Modvat credit.

---

---

Issues: Modvat credit disallowance due to factory premises shifting, Modvat credit disallowance for inputs sent to job worker

Issue 1: Modvat credit disallowance due to factory premises shifting
The appeal involved M/s. Colts Auto Ltd., a manufacturer of motor vehicle parts, who shifted their workshop and business premises. The issue was the disallowance of Modvat credit of duty paid on inputs because the company did not file a fresh declaration after shifting to a new location. The Tribunal referred to the amendment in Rule 57G of the Central Excise Rules, 1944, through Notification No. 7/99 and Board's Circular No. 441/7/99-CX. The circular empowered the Assistant Commissioner to allow credit of duty paid on inputs despite minor procedural lapses if satisfied that the inputs had suffered duty and were used in manufacturing. The Tribunal found that the inputs had indeed suffered duty and were used in manufacturing, with the only reason for denial being the failure to file a declaration. Consequently, the Tribunal held that the Modvat credit could not be disallowed.

Issue 2: Modvat credit disallowance for inputs sent to job worker
The second issue revolved around the disallowance of Modvat credit for inputs sent directly to a job worker. The appellants followed the procedure outlined in Board's Circular No. 33/33/94-CX. 8, dated 4-5-1994, but the credit was disallowed because it was recorded in their books of accounts immediately, although not utilized. The Tribunal noted that the Revenue did not dispute that the correct procedure was followed for sending inputs to the job worker. As a result, the Tribunal set aside the impugned order and allowed the appeal, concluding that there was no valid reason to disallow the Modvat credit in this scenario. The operative part of the order was pronounced in open court on 2-3-2005.

---