1993 (4) TMI 162 - AT - Central Excise

Tribunal denies transitional modvat credit for inputs in final products post-1989 amendment

The Tribunal upheld the decision disallowing transitional modvat credit for inputs in stock and final products, citing the amendment to Rule 57H ... Modvat - The expression “inputs in stock” Issues:Appeal against disallowance of transitional modvat credit for inputs in stock and final products; Interpretation of Rule 57H before and after 5-5-1989 amendment.Analysis:The Appeal challenged the disallowance of transitional modvat credit by the Collector of Central Excise (Appeals), Calcutta, upheld by the Assistant Collector of Central Excise, Cuttack. The contention was that despite the deletion of clause (ii) of sub-rule 1 of Rule 57H from 5-5-1989, the appellants were eligible for Modvat Credit for inputs in stock and final products. The appellants argued that denying Modvat credit for inputs in final products would disrupt revenue neutrality. They cited opinions from journals and RAC meetings supporting their view.The Senior Departmental Representative opposed the arguments, stating that post-5-5-1989, transitional benefit was limited to inputs received before obtaining the dated acknowledgement of the declaration. The benefit claimed by the appellants for inputs used in final products cleared after 1-3-1987 was deemed inadmissible due to the absence of sub-clause (ii) at the material time. The representative emphasized the plain reading of the provision and the inconsistency of any other interpretation.The Tribunal analyzed the provisions of Rule 57H before and after the crucial 5-5-1989 amendment. It was noted that the deletion of sub-clause (ii) post-amendment impacted the transitional credit for inputs used in final products cleared after 1-3-1987. The Tribunal agreed with the Departmental Representative that post-amendment, transitional credit was limited to inputs lying in stock only. The Tribunal rejected the appellants' argument that inputs present in final products should be covered under 'inputs in stock.' The deliberate reintroduction of the deleted provision in 1991 for aerated waters indicated the necessity to provide Modvat benefit for inputs contained in final products, not present as such. Therefore, the Tribunal upheld the order disallowing the transitional modvat credit and dismissed the Appeal.