1992 (1) TMI 131 - HC - Central Excise

Court permits credit transfer for glass bottles to aerated water duty under Rule 57A

The court allowed the writ petition, permitting the petitioner to utilize the credit on duty paid for glass bottles towards duty on aerated water ... Modvat/Cenvat Issues:Claim for credit on duty paid on glass bottles for manufacturing aerated water, applicability of Rule 57A of Central Excise Rules, interpretation of exemption notification GE 5.1, availability of Modvat credit facility, denial of credit after withdrawal of notification, determination of assessable value for exemption, inclusion of packaging materials in inputs, adjustment of credit against duty payable, legality of refund claim.Analysis:1. The petitioner sought relief for credit on duty paid on glass bottles used in manufacturing aerated water to pay duty on the final product. The claim was based on Rule 57A of the Central Excise Rules, which allows credit on inputs for payment of duty on final products. The petitioner also referred to notifications extending benefits to aerated water as a final product. The petitioner's right to credit was challenged after the withdrawal of the Modvat credit facility, leading to a dispute regarding the availability of credit for the period before the withdrawal.2. The Standing Counsel argued that the petitioner, being a small-scale industrial undertaking, had availed exemption under notification GE 5.1, limiting the aggregate value of specified goods for exemption eligibility. The counsel contended that including the cost of glass bottles would exceed the exemption limit, disqualifying the petitioner from further exemption. However, the court rejected this argument, stating that the valuation method specified in the exemption notification did not include the cost of durable packing materials like glass bottles.3. Another contention raised by the Standing Counsel was that the petitioner could not claim Rule 57A benefits due to the exclusion of packaging materials from the definition of inputs if their cost was not included in the assessable value of final products. The court refuted this argument, highlighting that the assessable value of aerated water was not determined under Section 4 of the Act but on a specified basis. The court emphasized that the petitioner rightfully claimed credit for glass bottles used in manufacturing aerated water.4. The Standing Counsel further argued that the petitioner, despite paying duty on specified goods, was subject to a value-based duty due to the exemption under GE 5.1. The court dismissed this argument, clarifying that the exemption percentage did not alter the basis of duty calculation. The court emphasized that the exemption only reduced the duty payable on the specified basis without converting it into a value-based duty.5. Lastly, the Standing Counsel contended that no provision allowed for a refund, and the credit facility was unavailable after the withdrawal of the notification. The petitioner, however, focused on adjusting the credit against duty payable for final products manufactured within a specific period. The court upheld the petitioner's right to utilize the credit for duty payment on final products manufactured during the relevant period and set aside the order denying such credit.In conclusion, the court allowed the writ petition, directing the authorities to permit the petitioner to utilize the credit on duty paid for glass bottles towards duty on aerated water manufactured within the specified period. The judgment clarified the interpretation of Rule 57A, exemption notifications, and the availability of Modvat credit facilities in the context of excise duty payment and credit utilization.