1994 (3) TMI 232 - AT - Central Excise

Tribunal permits Modvat credit for materials transferred for job work, clarifying eligibility rules.

The Tribunal allowed the appeal, holding that the appellant, a licensed Small Scale Unit, was eligible for deemed Modvat credit for materials received on ... Modvat - SSI Exemption and job work Issues:1. Eligibility for deemed Modvat Credit for a Small Scale Unit.Analysis:The case involves an appeal against an Order-in-Appeal by the Collector of Central Excise & Customs, Pune. The appellant, a Small Scale Unit manufacturing parts of Transmission Towers, availed exemption under Notification No. 175/86. They received input materials from another company under delivery challans and claimed deemed Modvat Credit for steel materials. The department denied the credit, alleging that the materials were not purchased by the appellant. The appellant argued that as per a subsequent clarification by the Board, deemed credit could be availed for all inputs received, regardless of purchase. The Collector (Appeals) accused the appellant of being part of a scheme to avoid proper procedures and benefit another company. However, the Tribunal found the accusation irrelevant to the appellant's eligibility for deemed credit as a licensed Small Scale Unit. The Tribunal held that the appellant, as a licensed manufacturer, was eligible for deemed credit as per the Board's Circular. The department raised concerns about the original suppliers availing actual or deemed credit for the materials. The Tribunal allowed the appeal, emphasizing that a Small Scale Manufacturer could claim deemed Modvat credit for materials received on a transfer basis, even for job work on behalf of another manufacturer, as per the Board's order.Additional Observation:The Tribunal noted a loophole in the scheme of higher notional credit, exploited by the supplying company. Despite this, the appellant, an independent manufacturer, could not be denied Modvat Credit without a legal basis. The Board's clarification allowed manufacturers to claim Modvat Credit even for inputs received other than by purchase. The Tribunal emphasized that Notification 175/86 did not prohibit a Small Scale Unit paying duty at a concessional rate from receiving inputs under the Modvat scheme, even if received for job work on behalf of another manufacturer.