TaxTMI 
TaxTMI 
1999 (6) TMI 202
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.... DR for the department. 4. Ld. Advocate submits that the following facts in this respect are not under dispute :- (a) That the appellants as manufacturers of the Sleepers are governed by a contract with the South Central Railway wherein it is provided that the Railway shall supply free-of-cost MCI Inserts to the appellants for the manufacture of R.C.C. Sleepers which are then sold to the Railways. Amongst the terms of this contract, it has clearly been agreed upon by both sides that the cost of the MCI Inserts shall be borne by the Railways, the Modvat credit on the duty incidence suffered by these Inserts shall be passed on to the appellants as it was the appellants who were using the said input in the final product. Ld. Advocate took us through the relevant paras which have delineated the quantum of duty incidence which would flow to the appellants in this behalf. (b) After the said R.C.C. Sleepers are manufactured, they are cleared on payment of duty to the said South Central Railways. (c) That when the said MCI Inserts are received at the manufacturing premises, they are accompanied by an Excise Invoice. This Invoice clearly shows the quantum of duty suf....
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....ership of the inputs is irrelevant to the issue of Modvat credit. 7. On the second issue of whether such invoices qualify as proper documents for availability of Modvat credit, ld. Advocate submits that a parallel instance would be one of transit sales where the manufacturer clears the inputs through the medium of a dealer to the end user, where the goods are normally used in the manufacture of final product under the Modvat scheme, need not be registered and that the invoices so issued to the original manufacturer will be a valid document for availing Modvat credit even though the transaction has been through the dealer in the form of a transit sale. Ld. Advocate submits that in this case, the same principle can be applied vis-a-vis the receipt of the Inserts through the Railways. He further submits that since the appellants' name and the address has always been mentioned in some manner or the other in conjunction with that of the South Central Railway on the body of the invoices, therefore, such invoices should not be held as being improper documents for the availability of Modvat credit, particularly when there was no dispute that the items had paid duty and were otherwise....
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.... all other ingredients including cement, iron & steel, etc. Therefore, it cannot be said that the appellants were job workers of the Railways and to that extent, the Board's circular would not apply to the facts of this case. Ld. DR also strenuously submits that since the Railways are the owners of the Inserts and as such, the duty incidence thereon was borne by the Railways, therefore, any Modvat thereon could only be availed of by the Railways as buyers thereof and not the appellants. However, since it is nobody's case that the Railways themselves are manufacturers, therefore in this case nobody could avail of the Modvat credit. Thirdly, ld. DR submits that since the agreement between the appellants and the Railways is undisputedly one on principal-to-principal basis, therefore, such a transport of goods from the Railways to the appellants is not a direct one, but involves trading by the Railways and since the Railways have not obtained any registration under the Modvat scheme as a dealer thereof, the invoice become tainted and Modvat credit would not be available thereon. 9. We have carefully considered the rival submissions as well as the records of the case. We find that....
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....d to Modvat credit where the inputs are totally supplied free-of-cost would be held as an illegal activity. We are of the clear view that ownership of inputs is divorced under the Modvat scheme from the question of use thereof in the final product under this scheme. The question is also one of who is the manufacturer of the Sleepers and it is not disputed in this case that the appellants are the manufacturers, the agreement between them and the Railways being on a principal-to-principal basis. Therefore, in view of these considerations, we find that simply because the Railways were the owners of the Inserts and it was they who had placed the order, purchase and supply thereof, on these grounds alone, the credit to the appellants cannot be denied under the Modvat scheme. 11. The next issue required to be considered by us is whether the invoices were improper documents vis-a-vis availability of Modvat credit on the inputs which were cleared and transported under their cover. In this respect, we are of the view that since it is not disputed that the name and address of the appellants were clearly written on each of these invoices, merely because the name and address of the purch....