Advantages of MODVAT


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Advantages of MODVAT

 

The Government Exchequer has benefited after the introduction of MODVAT scheme since there is increase in revenue as more and more manufactures are beginning to pay excise duty so as to make the receivers of such duty paid inputs available MODVAT facility.

 

The industry also enjoys the advantages of the concept by availing MODVAT facility which effectively reduces the purchase price of the inputs.

 

On the aspect of assessable value of final products vis-à-vis availing of MODVAT facility on inputs it was clearly spelt out by the tribunal in the case of collector of central exercise v. Incab industries that merely because MODVAT is being availed it cannot be insisted for reduction in the assessable value of final product even though MODVAT in fact reduces the cost of production. As the assessable value is determined in terms of selection 4 and MODVAT provisions are governed by rules [1990 (45) ELT 324 (TRI)].

 

It is very interesting to note that larger branch of the tribunal delivered judgment in the case of Dai Ichi Karkaria Ltd. V. Collector of central excise (1996-81-ELT-676-TRI) to declare that MODVAT credit availed in respect of input (and so also for capital goods ) is not addable to the assessable value. However the department has gone in appeal against this decision before Supreme Court which has been admitted.

 


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