2012 (3) TMI 147 - HC - Central Excise

High Court Upholds Excise Duty Ruling on Modvat Credit for Glass Bottles

The High Court dismissed the appeal under section 35-G of the Central Excise Act, 1944 regarding Modvat credit on glass bottles and crown corks. The court ... Modvat credit on the glasses of bottles included in the assessable value of aerated water during the material period - Revenue submits that as per clause (iii) of the explanation to Rule 57 A of the Central Excise Rules, the cost of packing material which is not included or had not been included in the preceding financial years in the assesseable value of the final product under Section 4 of the Central Excise Act, does not qualify as `inputs' for the purpose of the Modvat credit - Held that :- the assessee had added price of the empty glass bottles and crown corks in the assessable value of the final product as shown in the cost certificate issued by the Chartered Accountant and as such, they are entitled to avail the Modvat credit - the appeal, is dismissed as it does not raise any substantial question of law as the appeal against the order of the CESTAT cannot be entertained if it involves a question of fact Issues:- Appeal under section 35-G of the Central Excise Act, 1944 regarding Modvat credit on glass bottles and crown corks.- Interpretation of inclusion of cost in the assessable value of aerated water for charging excise duty.- Validity of certificate from Chartered Accountant regarding cost computation.- Burden of proof on the manufacturer for Modvat credit eligibility.- Distinction between inclusion of value of glass bottles and crown corks versus broken glass bottles.- Scope of section 35-G restricted to substantial questions of law.- Consideration of facts by the Tribunal and reliance on previous decisions.- Application of Rule 57-A of the Central Excise Rules for Modvat credit eligibility.- Entitlement to Modvat credit based on inclusion of glass bottles and crown corks in assessable value.- High Court's jurisdiction to entertain appeals involving questions of law.Analysis:The case involves an appeal under section 35-G of the Central Excise Act, 1944 concerning Modvat credit on glass bottles and crown corks used in the manufacturing of aerated water. The dispute revolves around whether the cost of these items was included in the assessable value of the final product for charging excise duty. The appellant argued that the certificate provided by the Chartered Accountant was incomplete and insufficient to prove the inclusion of costs. They contended that the Tribunal failed to address crucial issues and confused the inclusion of glass bottles and crown corks with broken glass bottles. On the other hand, the respondent argued that the Tribunal's decision was valid, citing precedents and emphasizing that the burden of proof lies with the manufacturer for Modvat credit eligibility. They highlighted the restricted scope of section 35-G to substantial questions of law and the High Court's jurisdiction in entertaining appeals based on legal issues.The Assessing Authority had initially allowed the Modvat credit, stating that the cost of glass bottles and crown corks was indeed included in the assessable value of aerated water. However, the Commissioner (Appeals) overturned this decision, leading to the appeal before the CESTAT. The Tribunal, considering the facts, reinstated the Assessing Authority's order, concluding that the glass bottles and crown corks were part of the assessable value. The High Court, after reviewing the orders and finding no factual discrepancies, dismissed the appeal as it did not raise any substantial question of law. This decision aligned with the principle that High Courts can only entertain appeals involving legal questions when there is no perversity or infirmity in the factual findings. The judgment reaffirmed the application of Rule 57-A of the Central Excise Rules for determining Modvat credit eligibility based on the inclusion of specific costs in the assessable value of the final product.