1990 (1) TMI 183 - AT - Central Excise

Tribunal allows Modvat credit appeal, confirming entitlement for duty paid inputs used in manufacturing.

COLLECTOR OF C. EX. Versus S. AIL

COLLECTOR OF C. EX. Versus S. AIL - 1990 (47) E.L.T. 389 (Tri.) Issues:- Appeal against disallowance of Modvat credit by Collector of Central Excise, Bhubaneswar.- Interpretation of Rule 57E prior to its amendment w.e.f. 15-4-1987.- Eligibility for Modvat credit in relation to duty payments subsequent to original clearance.- Application of Rule 57A and 57E in determining Modvat credit.- Disallowance of credit due to Chapter-X procedure for non-duty paid inputs.- Clarification on Modvat credit eligibility based on published materials and trade notices.Analysis:The case involves an appeal against the disallowance of Modvat credit by the Collector of Central Excise, Bhubaneswar, originating from two specific orders disallowing substantial amounts of Modvat credit taken in January 1987 and March 1986 to April 1987. The Collector (Appeals) had allowed the appeal filed by the respondent, holding them eligible for Modvat credit related to duty payments subsequent to the original payment at the time of goods clearance, supported by Gate Passes.The main issue revolves around the interpretation of Rule 57E before its amendment in April 1987. The appellant argued that Modvat credit should only be accorded for duty paid after clearance post the amendment. However, the Tribunal noted that Rule 57A allows credit for excise duty paid on goods used in manufacturing final products, not limited to duty paid at original clearance. The Tribunal emphasized that subsequent duty payments, if authenticated, are eligible for Modvat credit under Rule 57A, even if paid before the amendment.The dispute also involved the application of Rule 57A and 57E in determining Modvat credit eligibility. The Tribunal agreed with the Collector (Appeals) that the respondents were entitled to Modvat credit for duty payments subsequent to clearance, as per Rule 57A, despite the limitations of Rule 57E before the amendment.Another issue addressed was the disallowance of credit due to the Chapter-X procedure for non-duty paid inputs. The respondent clarified that part of the disallowed credit related to normal credit rejected based on using the Chapter-X procedure. However, the Tribunal upheld the Collector (Appeals) decision, affirming the eligibility for Modvat credit for duty paid inputs used in manufacturing final products.Furthermore, the Tribunal considered published materials and trade notices to clarify Modvat credit eligibility. The respondent referred to publications clarifying that Modvat credit is admissible if duty is paid on goods fully exempt from use in final product manufacturing. Based on these clarifications, the Tribunal dismissed the appeals and upheld the Collector (Appeals) orders, affirming the eligibility for Modvat credit as determined by the Collector (Appeals).