2003 (3) TMI 564 - AT - Central Excise

Modvat credit denied for exempt tractor parts under Rule 57C, Tribunal upholds decision.

ESCORTS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, DELHI

The Tribunal held that Modvat credit was not available to the appellant for tractor parts cleared without payment of Central Excise duty, in line with ... Modvat/Cenvat Issues involved:The common issue involved in the appeals is whether Modvat credit is available to the appellant in respect of duty paid on inputs used in the manufacture of finished goods cleared to their another factory under Notification No. 217/86-C.E., dated 2-4-1986 without payment of duty.Details of the Judgment:Issue 1: Applicability of Modvat credit and Rule 57CThe appellant argued that Modvat credit should be allowed as per Notification No. 217/86, emphasizing the vertical integration of production line across factories. They cited precedents supporting their position. The respondent countered, stating that Rule 57C prohibits credit if final products are exempt from duty. The respondent relied on a Tribunal decision and emphasized the importance of Rule 57C in disallowing credit in such cases.Issue 2: Interpretation of Central Excise RulesThe Tribunal analyzed Rule 57A and Rule 57C of the Central Excise Rules. Rule 57C explicitly states that credit is not allowed if final products are exempt from duty. The Tribunal highlighted the power of the Central Government to exempt goods from duty under Section 5A of the Central Excise Act. It was noted that once duty is exempted on final products, Rule 57C applies, as confirmed by a previous Larger Bench decision.In conclusion, the Tribunal upheld the application of Rule 57C, stating that Modvat credit is not admissible to the appellant for tractor parts cleared without payment of Central Excise duty. The decision aligned with the precedent set by the Larger Bench, emphasizing the non-availability of credit when final products are exempt from duty. All appeals were rejected based on this interpretation.